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# UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

# FORM 10-Q

# QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly
period ended June 30, 2005

NTS REALTY HOLDINGS
LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)

Delaware
(State of incorporation or organization)

001-32389
(Commission File No.)

41-2111139
(I.R.S. Employer Identification No.)

10172 Linn Station RoadLouisville, Kentucky 40223
(Address of principal executive offices)

(502) 426-4800
(Registrants telephone number, including area code)

Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes|X|      No[  ]

Indicate by check mark whether
registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes[  ]      No|X|

As of July 31, 2005, there were
11,381,608 limited partnership units outstanding.

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# NTS REALTY HOLDINGS
LIMITED PARTNERSHIP

# FORM 10-Q

# TABLE OF CONTENTS

|PART I - FINANCIAL INFORMATION                                                                 |   
|---------------------------------------------------------------------------------------------- | --
|                                                                                               |   
|ITEM 1 - FINANCIAL STATEMENTS                                                                  |   
|Balance Sheets as of June 30, 2005 and December 31, 2004                                       | 4 
|Statement of Partners' Equity as of June 30, 2005                                              | 4 
|Statements of Operations for the Three and Six Months Ended June 30, 2005                      | 5 
|Statements of Operations for the Three Months Ended June 30, 2004                              | 6 
|Statements of Operations for the Six Months Ended June 30, 2004                                | 7 
|Statement of Cash Flows for the Six Months Ended June 30, 2005                                 | 8 
|Statements of Cash Flows for the Six Months Ended June 30, 2004                                | 9 
|Notes to Financial Statements                                                                  | 10
|ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 34
|ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            | 41
|ITEM 4 - CONTROLS AND PROCEDURES                                                               | 41
|                                                                                               |   
|PART II - OTHER INFORMATION                                                                    |   
|                                                                                               |   
|ITEM 1 - LEGAL PROCEEDINGS                                                                     | 42
|ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                           | 42
|ITEM 3 - DEFAULTS UPON SENIOR SECURITIES                                                       | 43
|ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   | 43
|ITEM 5 - OTHER INFORMATION                                                                     | 43
|ITEM 6 - EXHIBITS                                                                              | 43
|SIGNATURES                                                                                     | 44

2

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# INFORMATION REGARDING
FORWARD-LOOKING STATEMENTS

Some
of the statements included in this quarterly report on Form 10-Q, particularly those
included in Part I, Item 2  Managements Discussion and Analysis of Financial
Condition and Results of Operations (MD&A), may be considered
forward-looking statements because the statements relate to matters which have
not yet occurred. For example, phrases such as we anticipate,
believe or expect indicate that it is possible that the event
anticipated, believed or expected may not occur. If these events do not occur, the result
which we expected also may, or may not, occur in a different manner, which may be more or
less favorable to us. We do not undertake any obligation to update these forward-looking
statements.

Any
forward-looking statements included in MD&A, or elsewhere in this report, reflect our
managing general partners best judgment based on known factors, but involve risks
and uncertainties. Actual results could differ materially from those anticipated in any
forward-looking statements as a result of a number of factors, including but not limited
to those described in our filings with the Securities and Exchange Commission,
particularly our registration statement on Form S-4, which became effective on October 27,
2004. Any forward-looking information provided by us pursuant to the safe harbor
established by the Private Securities Litigation Reform Act of 1995 should be evaluated in
the context of these factors.

3

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# PART I  FINANCIAL INFORMATION 
ITEM 1  FINANCIAL STATEMENTS

NTS REALTY HOLDINGS LIMITED PARTNERSHIPBalance Sheets as of June 30, 2005 and December 31, 2004

|                                                               | (Unaudited) |  |   |            
|-------------------------------------------------------------- | ----------- |  | - | -----------
|
|ASSETS:                                                        |             |  |   |            
|Cash and equivalents                                           |             |  | $ | 12,720,612 
|Cash and equivalents - restricted                              |             |  |   | 3,666,948  
|Accounts receivable, net of allowance for doubtful accounts of |             | 
|$266,603 at June 30, 2005 and $125,485 at December 31, 2004    |             |  |   | 2,016,468  
|Land, buildings and amenities, net                             |             |  |   | 155,611,481
|Other assets                                                   |             |  |   | 6,061,523  
|                                                               |             |  |   |            
|Total assets                                                   |             |  | $ | 180,077,032
|                                                               |             |  |   |            
|LIABILITIES:                                                   |             | 
|Mortgages and notes payable                                    |             |  | $ | 126,999,898
|Accounts payable and accrued expenses                          |             |  |   | 2,095,303  
|Accounts payable and accrued expenses - affiliate              |             |  |   | 440,222    
|Security deposits                                              |             |  |   | 895,405    
|Other liabilities                                              |             |  |   | 3,476,109  
|                                                               |             |  |   |            
|Total liabilities                                              |             |  |   | 133,906,937
|                                                               |             | 
|COMMITMENTS AND CONTINGENCIES (NOTE 10)                        |             | 
|                                                               |             | 
|PARTNERS' EQUITY                                               |             |  |   | 46,170,095 
|                                                               |             |  |   |            
|Total liabilities and partners' equity                         |             |  | $ | 180,077,032
|                                                               |             |  |   |            

NTS REALTY HOLDINGS LIMITED PARTNERSHIPStatement of Partners' Equity as of June 30, 2005
(Unaudited)

|                                    | General
Partner
Interests |  | Limited
Partners
Interests |         | General
Partner |  | Limited
Partners |  | Total |          
|----------------------------------- | ------------------------- |  | -------------------------- | ------- | --------------- |  | ---------------- |  | ----- | ---------
|PARTNERS' EQUITY:                   |                           |  |                            |         |                 |  |                  |  |       |          
|Initial equity                      |                           |  |                            | 714,491 |                 |  | 10,667,117       |  | $     | 3,131,381
|Net loss prior year                 |                           |  |                            | --      |                 |  | --               |  |       | (23,433  
|Net loss current year               |                           |  |                            | --      |                 |  | --               |  |       | (66,676  
|Cash distributions declared to date |                           |  |                            | --      |                 |  | --               |  |       | (142,898 
|                                    |                           |  |                            |         |                 |  |                  |  |       |          
|Balances on June 30, 2005           |                           |  |                            | 714,491 |                 |  | 10,667,117       |  | $     | 2,898,374
|                                    |                           |  |                            |         |                 |  |                  |  |       |          

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

4

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NTS REALTY HOLDINGS LIMITED PARTNERSHIPStatements of Operations for the Three and Six Months Ended June 30, 2005
(Unaudited)

|                                                      | Three Months
Ended
June 30, 2005 |  | Six Months
Ended
June 30, 2005 |           
|----------------------------------------------------- | -------------------------------- |  | ------------------------------ | ----------
|REVENUE:                                              |                                  |  |                                |           
|Rental income                                         |                                  |  | $                              | 8,254,459 
|Tenant reimbursements                                 |                                  |  |                                | 547,301   
|                                                      |                                  |  |                                |           
|Total revenue                                         |                                  |  |                                | 8,801,760 
|                                                      |                                  | 
|EXPENSES:                                             |                                  | 
|Operating expenses                                    |                                  |  |                                | 2,185,895 
|Operating expenses - affiliated                       |                                  |  |                                | 989,904   
|Management fees                                       |                                  |  |                                | 423,788   
|Real estate taxes                                     |                                  |  |                                | 582,012   
|Professional and administrative expenses              |                                  |  |                                | 785,942   
|Professional and administrative expenses - affiliated |                                  |  |                                | 344,296   
|Depreciation and amortization                         |                                  |  |                                | 2,129,064 
|                                                      |                                  |  |                                |           
|Total operating expenses                              |                                  |  |                                | 7,440,901 
|                                                      |                                  |  |                                |           
|OPERATING INCOME                                      |                                  |  |                                | 1,360,859 
|                                                      |                                  | 
|Interest and other income                             |                                  |  |                                | 119,261   
|Interest expense                                      |                                  |  |                                | (1,925,804
|Loss on disposal of assets                            |                                  |  |                                | (128,169  
|                                                      |                                  |  |                                |           
|NET LOSS                                              |                                  |  | $                              | (573,853  
|                                                      |                                  |  |                                |           
|NET LOSS ALLOCATED TO LIMITED PARTNERS                |                                  |  | $                              | (537,829  
|                                                      |                                  |  |                                |           
|NET LOSS PER LIMITED PARTNERSHIP UNIT                 |                                  |  | $                              | (0.05     
|                                                      |                                  |  |                                |           
|Number of limited partnership units                   |                                  |  |                                | 10,667,117
|                                                      |                                  |  |                                |           

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

5

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NTS REALTY HOLDINGS LIMITED PARTNERSHIP PREDECESSORSStatements of Operations for the Three Months Ended June 30, 2004
(Unaudited)

|                                | Three Months Ended June 30, 2004
|------------------------------- | --------------------------------
|
|REVENUE:                        |                                 
|Rental income                   |                                 
|Tenant reimbursements           |                                 
|                                |                                 
|Total revenue                   |                                 
|                                |                                 
|EXPENSES:                       |                                 
|Operating expenses              |                                 
|Operating expenses - affiliated |                                 
|Management fees                 |                                 
|Real estate taxes               |                                 
|Professional and administrative |                                 
|expenses                        |                                 
|Professional and administrative |                                 
|expenses - affiliated           |                                 
|Depreciation and amortization   |                                 
|                                |                                 
|Total operating expenses        |                                 
|                                |                                 
|OPERATING INCOME (LOSS)         |                                 
|                                |                                 
|Interest and other income       |                                 
|Interest expense                |                                 
|Loss on disposal of assets      |                                 
|Income from investment in joint |                                 
|ventures                        |                                 
|                                |                                 
|Income (loss) before minority   |                                 
|interest                        |                                 
|Minority interest income        |                                 
|                                |                                 
|NET INCOME (LOSS)               |                                 
|                                |                                 
|NET INCOME (LOSS)               |                                 
|ALLOCATED TO                    |                                 
|LIMITED PARTNERS                |                                 
|                                |                                 
|NET INCOME (LOSS)               |                                 
|PER LIMITED                     |                                 
|PARTNERSHIP UNIT                |                                 
|                                |                                 
|Weighted average number of      |                                 
|limited partnership units       |                                 
|                                |                                 

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

6

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NTS REALTY HOLDINGS LIMITED PARTNERSHIP PREDECESSORS Statements of Operations for the Six Months Ended June 30, 2004
(Unaudited)

|                                | Six Months Ended June 30, 2004
|------------------------------- | ------------------------------
|
|REVENUE:                        |                               
|Rental income                   |                               
|Tenant reimbursements           |                               
|                                |                               
|Total revenue                   |                               
|                                |                               
|EXPENSES:                       |                               
|Operating expenses              |                               
|Operating expenses -affiliated  |                               
|Management fees                 |                               
|Real estate taxes               |                               
|Professional and administrative |                               
|expenses                        |                               
|Professional and administrative |                               
|expenses - affiliated           |                               
|Depreciation and amortization   |                               
|                                |                               
|Total operating expenses        |                               
|                                |                               
|OPERATING INCOME (LOSS)         |                               
|                                |                               
|Interest and other income       |                               
|Interest expense                |                               
|Loss on disposal of assets      |                               
|Income from investment in joint |                               
|ventures                        |                               
|                                |                               
|Income (loss) before minority   |                               
|interest                        |                               
|Minority interest (loss) income |                               
|                                |                               
|NET INCOME (LOSS)               |                               
|                                |                               
|NET INCOME (LOSS)               |                               
|ALLOCATED TO                    |                               
|LIMITED PARTNERS                |                               
|                                |                               
|NET INCOME (LOSS)               |                               
|PER LIMITED                     |                               
|PARTNERSHIP UNIT                |                               
|                                |                               
|Weighted average number of      |                               
|limited partnership units       |                               
|                                |                               

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

7

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NTS REALTY HOLDINGS LIMITED PARTNERSHIPStatement of Cash Flows for the Six Months Ended June 30, 2005
(Unaudited)

|                                                                                | Six Months
Ended
June 30, 2005
|------------------------------------------------------------------------------- | ------------------------------
|OPERATING ACTIVITIES:                                                           |                               
|Net loss                                                                        |                               
|Adjustments to reconcile net loss to net cash provided by operating activities: |                               
|Loss on disposal of assets                                                      |                               
|Depreciation and amortization                                                   |                               
|Write-off of loan costs                                                         |                               
|Changes in assets and liabilities:                                              |                               
|Cash and equivalents - restricted                                               |                               
|Accounts receivable                                                             |                               
|Other assets                                                                    |                               
|Accounts payable and accrued expenses                                           |                               
|Accounts payable and accrued expenses - affiliate                               |                               
|Security deposits                                                               |                               
|Other liabilities                                                               |                               
|                                                                                |                               
|Net cash provided by operating activities                                       |                               
|                                                                                |                               
|INVESTING ACTIVITIES:                                                           |                               
|Additions to land, buildings and amenities                                      |                               
|Cash and equivalents - restricted                                               |                               
|                                                                                |                               
|Net cash used in investing activities                                           |                               
|                                                                                |                               
|FINANCING ACTIVITIES:                                                           |                               
|Proceeds from mortgages and notes payable                                       |                               
|Principal payments on mortgages and notes payable                               |                               
|Payoff of notes payable                                                         |                               
|Payoff of revolving note payable                                                |                               
|Additions to loan costs                                                         |                               
|Cash distributions                                                              |                               
|                                                                                |                               
|Net cash provided by financing activities                                       |                               
|                                                                                |                               
|NET INCREASE IN CASH AND EQUIVALENTS                                            |                               
|                                                                                |                               
|CASH AND EQUIVALENTS, beginning of period                                       |                               
|                                                                                |                               
|CASH AND EQUIVALENTS, end of period                                             |                               
|                                                                                |                               

The
accompanying notes to financial statements are an integral part of this statement.

8

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NTS REALTY HOLDINGS LIMITED PARTNERSHIP PREDECESSORSStatements of Cash Flows for the Six Months Ended June 30, 2004
(Unaudited)

|                                      | Six Months Ended June 30, 2004
|------------------------------------- | ------------------------------
|
|OPERATING ACTIVITIES:                 |                               
|Net income (loss)                     |                               
|Adjustments to reconcile net          |                               
|income (loss)  to net  cash  provided |                               
|by (used in) operating activities:    |                               
|Loss on disposal of assets            |                               
|Depreciation and amortization         |                               
|Income from investment in             |                               
|joint ventures                        |                               
|Minority interest (loss) income       |                               
|Changes in assets and liabilities:    |                               
|Cash and equivalents - restricted     |                               
|Accounts receivable                   |                               
|Other assets                          |                               
|Accounts payable and accrued          |                               
|expenses                              |                               
|Security deposits                     |                               
|Other liabilities                     |                               
|                                      |                               
|Net  cash  provided  by  (used in)    |                               
|operating activities                  |                               
|                                      |                               
|INVESTING ACTIVITIES:                 |                               
|Additions to land, buildings and      |                               
|amenities                             |                               
|Investments in and advances from      |                               
|joint ventures                        |                               
|Minority interest                     |                               
|                                      |                               
|Net cash used in investing            |                               
|activities                            |                               
|                                      |                               
|FINANCING ACTIVITIES:                 |                               
|Proceeds from mortgages and           |                               
|notes payable                         |                               
|Principal payments on mortgages       |                               
|and notes payable                     |                               
|Cash distributions                    |                               
|Cash contributions                    |                               
|Additions to loan costs               |                               
|                                      |                               
|Net cash used in financing            |                               
|activities                            |                               
|                                      |                               
|NET INCREASE (DECREASE)               |                               
|IN CASH AND EQUIVALENTS               |                               
|                                      |                               
|CASH AND EQUIVALENTS,                 |                               
|beginning of period                   |                               
|                                      |                               
|CASH AND EQUIVALENTS,                 |                               
|end of period                         |                               
|                                      |                               

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

9

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NTS REALTY HOLDINGS LIMITED PARTNERSHIPNotes to Financial Statements
(Unaudited)

The
unaudited financial statements included herein should be read in conjunction with NTS
Realty Holdings Limited Partnerships (NTS Realty) 2004 annual report on
Form 10-K as filed with the Securities and Exchange Commission on March 31, 2005. In the
opinion of our managing general partner, all adjustments, consisting only of normal
recurring accruals, necessary for a fair presentation have been made to the accompanying
financial statements for the three and six months ended June 30, 2005 and 2004. The
results of operations for the interim periods are not necessarily indicative of the
results that may be expected for the full year or any other interim period. As used in
this quarterly report on Form 10-Q the terms we, us or
our, as the context requires, may refer to NTS Realty or its interests in its
properties.

# Note 1  Summary of
Significant Accounting Policies

Organization
and Distribution Policy

NTS
Realty was organized in the state of Delaware in 2003. Our registration statement on Form
S-4 was made effective by the Securities and Exchange Commission (SEC) on
October 27, 2004 with respect to a proposed merger of 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. (the Partnerships)
registered under the Securities Exchange Act of 1934, along with other real estate
entities affiliated with their general partners, specifically Blankenbaker Business Center
1A and the NTS Private Groups assets and liabilities. Certain litigation as
described in Note  10 Commitments and Contingencies was settled in connection with
the merger. The merger was completed on December 28, 2004 after a majority of the
outstanding limited partnership interests of each Partnership were voted in favor of the
merger. As a result of the merger, the Partnerships and Blankenbaker Business Center 1A
ceased to exist by operation of law. Concurrent with the merger, ORIG, LLC, a Kentucky
limited liability company (ORIG), affiliated with the Partnerships
general partners, contributed substantially all of its assets and liabilities to NTS
Realty, including the NTS Private Group properties. We accounted for the merger using the
purchase method. All purchase price allocations are final.

The
Partnerships, NTS Private Group and Blankenbaker Business Center 1A are referred to as NTS
Realtys Predecessors (the Predecessors). NTS Realty did not have
significant operations until the merger on December 28, 2004. All operations prior to that
are for the Predecessors and are reflected as such in the accompanying Statements of
Operations. The Predecessors operating results were substantially complete as of
December 27, 2004 for the calendar year ended December 31, 2004.

In
connection with the merger, we issued 11,381,608 limited partnership units to the former
limited and general partners of the Partnerships and to ORIG. We refinanced approximately
$94.0 million of debt on the properties contributed by the Partnerships and ORIG with
approximately $119.0 million of new debt. Acquisition of the new debt required us to pay
yield maintenance premiums on the refinanced debt, which totaled approximately $5.8
million.

We
are in the business of developing, constructing, owning and operating multifamily
properties, commercial and retail real estate and land leases. Following the merger and
contribution and as of June 30, 2005, we own thirty-two properties, comprised of nine
multifamily properties; nineteen office and business centers; three retail properties; and
one ground lease. The properties are located in and around Louisville (22) and Lexington
(3), Kentucky; Orlando (2) and Fort Lauderdale (3), Florida; Indianapolis (1), Indiana and
Atlanta (1), Georgia. Our office and business centers aggregate approximately 1.7 million
square feet. We own multifamily properties containing approximately 1,350 units and retail
properties containing approximately 210,000 square feet of space, as well as one ground
lease associated with a 120-space parking lot attached to one of our properties.

The
consolidated financial statements of NTS-Properties V and NTS-Properties VI include the
accounts of all wholly-owned properties and majority-owned joint ventures. Intercompany
transactions and balances have been eliminated.

10

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We
pay distributions if and when authorized by our managing general partner. We are required
to pay distributions on a quarterly basis, commencing in the first quarter of 2005, equal
to sixty-five percent (65%) of our net cash flow from operations as this term
is defined in regulations promulgated by the Treasury Department under the Internal
Revenue Code of 1986, as amended; provided that if a law is enacted or existing law is
modified or interpreted in a manner that subjects us to taxation as a corporation or
otherwise subjects us to entity level taxation for federal, state or local income tax
purposes, we will adjust the amount distributed to reflect our obligation to pay tax. Any
distribution other than a distribution with respect to the final quarter of a calendar
year shall be made no later than forty-five (45) days after the last day of such quarter
based on our estimate of net cash flow from operations for the year. Any
distribution with respect to the final quarter of a calendar year shall be made no later
than ninety (90) days after the last day of such quarter based on actual net cash
flow from operations for the year, adjusted for any excess or insufficient
distributions made with respect to the first three quarters of the calendar year.

Net
cash flow from operations may be reduced by the amount of reserves as determined by
us each quarter. NTS Realty Capital will establish these reserves for, among other things,
working capital or capital improvement needs. Therefore, there is no assurance that we
will have net cash flow from operations from which to pay distributions in the
future. For example, our partnership agreement permits our managing general partner to
reinvest sales or refinancing proceeds in new and existing properties or to create
reserves to fund future capital expenditures. Because net cash flow from
operations is calculated after reinvesting sales or refinancing proceeds or
establishing reserves, we may not have any net cash flow from operations from
which to pay distributions.

We
paid quarterly distributions of $0.10 per unit to limited partners on May 13, 2005 and
July 15, 2005.

# Note 2  Use of
Estimates in the Preparation of Financial Statements

The
preparation of financial statements in accordance with U.S. generally accepted accounting
principles requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

# Note 3 
Concentration of Credit Risk

We
own and operate multifamily, commercial and retail properties and a land lease in
Louisville and Lexington, Kentucky, Fort Lauderdale and Orlando, Florida, Indianapolis,
Indiana and Atlanta, Georgia.

Our
financial instruments that are exposed to concentrations of credit risk consist of cash
and equivalents. We maintain our cash accounts primarily with banks located in Kentucky.
The total cash balances are insured by the FDIC up to $100,000 per bank account. We may at
times, in certain accounts, have deposits in excess of $100,000.

# Note 4  Cash and
Equivalents

Cash
and equivalents include cash on hand and short-term, highly liquid investments with
initial maturities of three months or less. We have a cash management program which
provides for the overnight investment of excess cash balances. Under an agreement with a
bank, excess cash is invested in a mutual fund for U.S. government and agency securities
each night. As of June 30, 2005, approximately $2,193,000 of our overnight investment was
included in cash and equivalents.

# Note 5  Cash and
Equivalents  Restricted

Cash
and equivalents  restricted represents cash on hand and short-term, highly liquid
investments with initial maturities of three months or less which have been escrowed with
certain mortgage companies and banks for property taxes, insurance and tenant improvements
in accordance with certain loan and lease agreements and certain security deposits.

11

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# Note 6  Property
and Depreciation

Land,
buildings and amenities are stated at cost. Costs directly associated with the
acquisition, development and construction of a project are capitalized. Depreciation is
computed using the straight-line method over the estimated useful lives of the assets
which are 5-30 years for land improvements, 7-30 years for buildings and improvements and
5-30 years for amenities. Tenant improvements are generally depreciated over the life of
the current term of the respective tenant lease.

Depreciation
expense for the three and six months ended June 30, 2005 and 2004 was as follows:

|                                | (Unaudited) | 
|------------------------------- | ----------- | 
|
|
|NTS Realty                      |             | 
|                               
|NTS-Properties III              |             | 
|NTS-Properties IV               |             | 
|NTS-Properties V                |             | 
|NTS-Properties VI               |             | 
|NTS-Properties VII              |             | 
|NTS Private Group               |             | 
|Blankenbaker Business Center 1A |             | 

|                                | (Unaudited) | 
|------------------------------- | ----------- | 
|
|
|NTS Realty                      |             | 
|                               
|NTS-Properties III              |             | 
|NTS-Properties IV               |             | 
|NTS-Properties V                |             | 
|NTS-Properties VI               |             | 
|NTS-Properties VII              |             | 
|NTS Private Group               |             | 
|Blankenbaker Business Center 1A |             | 

Statement
of Financial Accounting Standards No. 144 Accounting for the Impairment or Disposal
of Long-Lived Assets, specifies circumstances in which certain long-lived assets
must be reviewed for impairment. If the carrying amount of an asset exceeds the sum of its
expected future cash flows, the assets carrying value must be written down to fair
value. In determining the value of an investment property and whether the investment
property is impaired, management considers several factors such as projected rental and
vacancy rates, property operating expenses, capital expenditures and interest rates. The
capitalization rate used to determine property valuation is based on the market in which
the investment property is located, length of leases, tenant financial strength, the
economy in general, demographics, environment, property location, visibility, age and
physical condition among others. All of these factors are considered by management in
determining the value of any particular investment property. The value of any particular
investment property is sensitive to the actual results of any of these factors, either
individually or taken as a whole. If the actual results differ from managements
judgment, the valuation could be negatively or positively affected. Application of this
standard during the six months ended June 30, 2005 and 2004 did not result in an
impairment loss.

12

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# Note 7  Mortgages
and Notes Payable

Mortgages
and notes payable consist of the following:

|                                                                                                                                                                                                                                                                                                                                     | (Unaudited) |  |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------- |  | -
|
|Note payable to a bank with  interest  payable in monthly  installments, at a 
variable rate based on LIBOR  one-month  rate plus 1.75%,  due June 28, 2005.
The note was refinanced in March 2005, as discussed below                                                                                                               |             |  | $
|                                                                                                                                                                                                                                                                                                                                    
|Mortgage  payable  to an  insurance  company  in  monthly  installments, bearing
interest  at 5.07%,  maturing  on March 15,  2015,  secured  by certain land and 
buildings, with a carrying value of $26,116,721                                                                                                                   |             |  | $
|                                                                                                                                                                                                                                                                                                                                    
|Mortgage payable to a bank in monthly installments,  bearing interest at a
variable  rate based on LIBOR  one-month  rate plus  2.50%,  currently 5.61%, due
January 1, 2008, secured by certain land and buildings,  with a carrying  value of
$16,994,220.  The  mortgage is  guaranteed  by Mr. Nichols (75%) and Mr. Lavin (25%) |             |  | $
|                                                                                                                                                                                                                                                                                                                                    
|Mortgage  payable  to an  insurance  company  in  monthly  installments, bearing
interest  at 5.98%,  maturing  January  15,  2015,  secured  by certain land and
buildings, with a carrying value of $73,790,142                                                                                                                    |             |  | $
|                                                                                                                                                                                                                                                                                                                                    
|Mortgage payable to a bank in monthly installments,  bearing interest at 9.00%,
maturing August 1, 2010, secured by certain land and a building, with a carrying
value of $2,977,436                                                                                                                                                 |             |  | $
|                                                                                                                                                                                                                                                                                                                                    
|Mortgage  payable  to an  insurance  company  in  monthly  installments, bearing
interest  at 8.45%,  maturing  November  1,  2015,  secured  by certain land and a
building, with a carrying value of $2,608,704                                                                                                                    |             |  | $
|                                                                                                                                                                                                                                                                                                                                    
|Mortgage  payable  to an  insurance  company  in  monthly  installments, bearing
interest  at 8.375%,  maturing  December  1,  2010,  secured by certain  land,
buildings  and  amenities,  with  a  carrying  value  of $2,728,080                                                                                                  |             |  | $
|                                                                                                                                                                                                                                                                                                                                    
|Note  payable  to a finance  company in  monthly  installments,  bearing interest at
8.50%,  due July 15, 2006,  secured by  equipment.  The note was paid in
full in January 2005                                                                                                                                                   |             |  | $
|                                                                                                                                                                                                                                                                                                                                     |             |  |  
|                                                                                                                                                                                                                                                                                                                                     |             |  | $
|                                                                                                                                                                                                                                                                                                                                     |             |  |  

Based on
the borrowing rates currently available to us for loans with similar terms and average
maturities, the fair value of long-term debt on June 30, 2005 was approximately
$123,247,000.

The
note payable to a bank was paid from the proceeds of a $30 million mortgage payable to an
insurance company in March 2005. The mortgage payable bears interest at a fixed rate of
5.07%, maturing on March 15, 2015 and is secured by certain land and buildings, with a
carrying value of $26,116,721.

Our
mortgages may be prepaid but are generally subject to a yield-maintenance premium.

# Note 8  Accounts
Payable and Accrued Expenses  Affiliate

Accounts
payable and accrued expenses  affiliate includes amounts owed to NTS Development
Company for reimbursement of salary and overhead expenses.

13

---

# Note 9  Related
Party Transactions

NTS
Realty

NTS
Realtys properties are managed under an agreement with NTS Development Company
(NTS Devco), an affiliate of NTS Realtys general partners. NTS Devco is
paid a management fee pursuant to the terms of an agreement entered into with NTS Realty.
NTS Devco is also reimbursed its actual costs for services rendered to NTS Realty.

We
were charged the following amounts pursuant to an agreement with NTS Devco for the three
and six months ended June 30, 2005. These charges include items which have been expensed
as operating expenses  affiliated or professional and administrative expenses 
affiliated and items which have been capitalized as other assets or as land, buildings and
amenities.

|                                                      | (Unaudited) |  | (Unaudited) |          
|----------------------------------------------------- | ----------- |  | ----------- | ---------
|
|Property management fees                              |             |  | $           | 423,788  
|                                                      |             |  |             |          
|Property management                                   |             |  |             | 611,088  
|Leasing                                               |             |  |             | 50,422   
|Administrative - operating                            |             |  |             | 300,117  
|Other                                                 |             |  |             | 28,277   
|                                                      |             |  |             |          
|Total operating expenses - affiliated                 |             |  |             | 989,904  
|                                                      |             |  |             |          
|Professional and administrative expenses - affiliated |             |  |             | 344,296  
|                                                      |             |  |             |          
|Related party transactions capitalized                |             |  |             | --       
|                                                      |             |  |             |          
|Total related party transactions                      |             |  | $           | 1,757,988
|                                                      |             |  |             |          

During
the three and six months ended June 30, 2005, we were charged $15,267 and $30,428,
respectively, for property maintenance fees from affiliates of NTS Devco.

NTS
Devco leased 20,368 square feet in one of our properties, NTS Center, at a rental rate of
$14.50 per square foot. We received rental payments of approximately $148,000 from NTS
Devco during the six months ended June 30, 2005.

NTS
Devco leased 1,604 square feet in Commonwealth Business Center Phase I, at a rental rate
of $5.50 per square foot. We received rental payments of approximately $4,000 from NTS
Devco during the six months ended June 30, 2005.

14

---

NTS-Properties
III

Prior
to the merger and pursuant to an agreement with NTS-Properties III (NTS-III),
NTS Devco, an affiliate of NTS-IIIs general partner, received property management
fees on a monthly basis. The fees were paid in an amount equal to 5% of the gross receipts
from our properties. Also pursuant to an agreement, NTS Devco received a repair and
maintenance fee equal to 5.9% of costs incurred which related to capital improvements.
These repair and maintenance fees were capitalized as part of land, buildings and
amenities.

NTS-III
was charged the following amounts pursuant to an agreement with NTS Devco for the three
and six months ended June 30, 2004. These charges included items which were expensed as
operating expenses  affiliated or professional and administrative expenses 
affiliated and items which were capitalized as other assets or as land, buildings and
amenities.

|                                                      | (Unaudited) |  | (Unaudited) |        
|----------------------------------------------------- | ----------- |  | ----------- | -------
|
|Property management fees                              |             |  | $           | 46,041 
|                                                      |             |  |             |        
|Property management                                   |             |  |             | 52,777 
|Leasing                                               |             |  |             | 9,094  
|Administrative - operating                            |             |  |             | 17,580 
|Other                                                 |             |  |             | 2,600  
|                                                      |             |  |             |        
|Total operating expenses - affiliated                 |             |  |             | 82,051 
|                                                      |             |  |             |        
|Professional and administrative expenses - affiliated |             |  |             | 39,898 
|                                                      |             |  |             |        
|Repairs and maintenance                               |             |  |             | 3,816  
|Leasing commissions                                   |             |  |             | 1,380  
|                                                      |             |  |             |        
|Related party transactions capitalized                |             |  |             | 5,196  
|                                                      |             |  |             |        
|Total related party transactions                      |             |  | $           | 173,186
|                                                      |             |  |             |        

During
the three and six months ended June 30, 2004, NTS-III was charged $1,828 and $3,657,
respectively, for property maintenance fees from an affiliate of NTS Devco.

During
the three and six months ended June 30, 2004, NTS Devco leased 20,368 square feet in NTS
Center at a rental rate of $14.50 per square foot. NTS-III received rental payments of
approximately $148,000, or 9%, of their total rental income, from NTS Devco during the six
months ended June 30, 2004.

15

---

NTS-Properties
IV

Prior
to the merger and pursuant to an agreement with NTS-Properties IV (NTS-IV),
NTS Devco, an affiliate of NTS-IVs general partner, received property management
fees on a monthly basis. The fees were paid in an amount equal to 5% of the gross receipts
from the multifamily property and 6% of the gross receipts from the commercial properties.
Also pursuant to an agreement, NTS Devco received a repair and maintenance fee equal to
5.9% of costs incurred which related to capital improvements. These repair and maintenance
fees were capitalized as part of land, buildings and amenities.

NTS-IV
was charged the following amounts pursuant to an agreement with NTS Devco for the three
and six months ended June 30, 2004. These charges included items which were expensed as
operating expenses  affiliated or professional and administrative expenses 
affiliated and items which were capitalized as other assets or as land, buildings and
amenities.

|                                                      | (Unaudited) |  | (Unaudited) |        
|----------------------------------------------------- | ----------- |  | ----------- | -------
|
|Property management fees                              |             |  | $           | 34,144 
|                                                      |             |  |             |        
|Property management                                   |             |  |             | 73,545 
|Leasing                                               |             |  |             | 12,426 
|Administrative - operating                            |             |  |             | 25,793 
|Other                                                 |             |  |             | 3,150  
|                                                      |             |  |             |        
|Total operating expenses - affiliated                 |             |  |             | 114,914
|                                                      |             |  |             |        
|Professional and administrative expenses - affiliated |             |  |             | 42,724 
|                                                      |             |  |             |        
|Repairs and maintenance                               |             |  |             | 1,990  
|Leasing commissions                                   |             |  |             | --     
|                                                      |             |  |             |        
|Related party transactions capitalized                |             |  |             | 1,990  
|                                                      |             |  |             |        
|Total related party transactions                      |             |  | $           | 193,772
|                                                      |             |  |             |        

During
the three and six months ended June 30, 2004, NTS Devco leased 1,604 square feet in
Commonwealth Business Center Phase I at a rental rate of $5.50 per square foot. NTS-IV
received rental payments of approximately $4,000 from NTS Devco during the six months
ended June 30, 2004.

16

---

NTS-Properties
V

Prior
to the merger and pursuant to an agreement with NTS-Properties V (NTS-V), NTS
Devco, an affiliate of NTS-Vs general partner, received property management fees on
a monthly basis. The fees were paid in an amount equal to 5% of the gross receipts from
the multifamily property and 6% of the gross receipts from the commercial properties. Also
pursuant to an agreement, NTS Devco received a repair and maintenance fee equal to 5.9% of
costs incurred which related to capital improvements. These repair and maintenance fees
were capitalized as part of land, buildings and amenities.

NTS-V
was charged the following amounts pursuant to an agreement with NTS Devco for the three
and six months ended June 30, 2004. These charges included items which were expensed as
operating expenses  affiliated or professional and administrative expenses 
affiliated and items which were capitalized as other assets or as land, buildings and
amenities.

|                                                      | (Unaudited) |  | (Unaudited) |        
|----------------------------------------------------- | ----------- |  | ----------- | -------
|
|Property management fees                              |             |  | $           | 70,406 
|                                                      |             |  |             |        
|Property management                                   |             |  |             | 105,495
|Leasing                                               |             |  |             | 10,208 
|Administrative - operating                            |             |  |             | 30,920 
|Other                                                 |             |  |             | 2,401  
|                                                      |             |  |             |        
|Total operating expenses - affiliated                 |             |  |             | 149,024
|                                                      |             |  |             |        
|Professional and administrative expenses - affiliated |             |  |             | 54,465 
|                                                      |             |  |             |        
|Repairs and maintenance                               |             |  |             | 4,737  
|Leasing commissions                                   |             |  |             | 187    
|                                                      |             |  |             |        
|Related party transactions capitalized                |             |  |             | 4,924  
|                                                      |             |  |             |        
|Total related party transactions                      |             |  | $           | 278,819
|                                                      |             |  |             |        

17

---

NTS-Properties
VI

Prior
to the merger and pursuant to an agreement with NTS-Properties VI (NTS-VI),
NTS Devco, an affiliate of NTS-VIs general partner, received property management
fees on a monthly basis. The fees were equal to 5% and 6% of the gross revenues from the
multifamily properties and the commercial property, respectively. Also pursuant to an
agreement, NTS Devco received a repair and maintenance fee equal to 5.9% of costs incurred
which related to capital improvements and major repair and renovation projects. These
repair and maintenance fees were capitalized as part of land, buildings and amenities.

NTS-VI
was charged the following amounts pursuant to an agreement with NTS Devco for the three
and six months ended June 30, 2004. These charges included items which were expensed as
operating expenses  affiliated or professional and administrative expenses 
affiliated and items which were capitalized as other assets or as land, buildings and
amenities.

|                                                      | (Unaudited) |  | (Unaudited) |        
|----------------------------------------------------- | ----------- |  | ----------- | -------
|
|Property management fees                              |             |  | $           | 134,196
|                                                      |             |  |             |        
|Property management                                   |             |  |             | 260,846
|Leasing                                               |             |  |             | 32,651 
|Administrative - operating                            |             |  |             | 85,333 
|Other                                                 |             |  |             | 5,411  
|                                                      |             |  |             |        
|Total operating expenses - affiliated                 |             |  |             | 384,241
|                                                      |             |  |             |        
|Professional and administrative expenses - affiliated |             |  |             | 110,918
|                                                      |             |  |             |        
|Repairs and maintenance                               |             |  |             | 10,359 
|Leasing commissions                                   |             |  |             | --     
|                                                      |             |  |             |        
|Related party transactions capitalized                |             |  |             | 10,359 
|                                                      |             |  |             |        
|Total related party transactions                      |             |  | $           | 639,714
|                                                      |             |  |             |        

During
the three and six months ended June 30, 2004, NTS-VI was charged $7,006 and $14,013,
respectively, for property maintenance fees from an affiliate of NTS Devco.

18

---

NTS-Properties
VII

Prior
to the merger and pursuant to an agreement with NTS-Properties VII (NTS-VII),
NTS Devco, an affiliate of NTS-VIIs general partner, received property management
fees on a monthly basis. The fees were equal to 5% of the gross revenues from our
multifamily properties. Also pursuant to an agreement, NTS Devco received a repair and
maintenance fee equal to 5.9% of costs incurred which related to capital improvements and
major repair and renovation projects. These repair and maintenance fees were capitalized
as part of land, buildings and amenities.

NTS-VII
was charged the following amounts pursuant to an agreement with NTS Devco for the three
and six months ended June 30, 2004. These charges included items which were expensed as
operating expenses  affiliated or professional and administrative expenses 
affiliated and items which were capitalized as other assets or as land, buildings and
amenities.

|                                                      | (Unaudited) |  | (Unaudited) |        
|----------------------------------------------------- | ----------- |  | ----------- | -------
|
|Property management fees                              |             |  | $           | 19,647 
|                                                      |             |  |             |        
|Property management                                   |             |  |             | 40,709 
|Leasing                                               |             |  |             | 5,272  
|Administrative - operating                            |             |  |             | 19,487 
|Other                                                 |             |  |             | 612    
|                                                      |             |  |             |        
|Total operating expenses - affiliated                 |             |  |             | 66,080 
|                                                      |             |  |             |        
|Professional and administrative expenses - affiliated |             |  |             | 36,007 
|                                                      |             |  |             |        
|Related party transactions capitalized                |             |  |             | --     
|                                                      |             |  |             |        
|Total related party transactions                      |             |  | $           | 121,734
|                                                      |             |  |             |        

19

---

NTS
Private Group

Prior
to the merger, NTS Devco, an affiliate of NTS Private Group (the Group),
received property management fees on a monthly basis. The fees were equal to 6% of the
gross revenues from commercial and retail properties and $100 monthly for each commercial
land lease. Also pursuant to an agreement, NTS Devco received a repair and maintenance fee
equal to 5% of costs incurred which related to capital improvements and major repair and
renovation projects. These repair and maintenance fees were capitalized as part of land,
buildings and amenities.

The
Group was charged the following amounts by NTS Devco for the three and six months ended
June 30, 2004. These charges included items which were expensed as operating expenses
 affiliated and items which were capitalized as other assets or as land, buildings
and amenities.

|                                                      | (Unaudited) |  | (Unaudited) |        
|----------------------------------------------------- | ----------- |  | ----------- | -------
|
|Property management fees                              |             |  | $           | 141,722
|                                                      |             |  |             |        
|Property management                                   |             |  |             | 119,680
|Leasing                                               |             |  |             | 17,910 
|Administrative - operating                            |             |  |             | 44,789 
|Other                                                 |             |  |             | 5,445  
|                                                      |             |  |             |        
|Total operating expenses - affiliated                 |             |  |             | 187,824
|                                                      |             |  |             |        
|Professional and administrative expenses - affiliated |             |  |             | --     
|                                                      |             |  |             |        
|Repairs and maintenance                               |             |  |             | 7,227  
|Leasing commissions                                   |             |  |             | 16,558 
|                                                      |             |  |             |        
|Related party transactions capitalized                |             |  |             | 23,785 
|                                                      |             |  |             |        
|Total related party transactions                      |             |  | $           | 353,331
|                                                      |             |  |             |        

During
the three and six months ended June 30, 2004, the Group was charged $8,452 and $16,904,
respectively, for property maintenance fees from affiliates of NTS Devco.

20

---

Blankenbaker
Business Center 1A

Prior
to the merger and pursuant to an agreement with the partnerships which formed Blankenbaker
Business Center 1A, NTS Devco, an affiliate of the general partners of the partnerships,
received a property management fee on a monthly basis. The fee was equal to 6% of the
gross revenues. Also permitted by an agreement, NTS Devco received a repair and
maintenance fee equal to 5.9% of costs incurred which related to capital improvements.
These repair and maintenance fees were capitalized as part of land, buildings and
amenities.

Blankenbaker
Business Center 1A was charged the following amounts pursuant to an agreement with NTS
Devco for the three and six months ended June 30, 2004. These charges included items which
were expensed as operating expenses  affiliated and items which were capitalized as
other assets or as land, buildings and amenities.

|                                                      | (Unaudited) |  | (Unaudited) |       
|----------------------------------------------------- | ----------- |  | ----------- | ------
|
|Property management fees                              |             |  | $           | 14,239
|                                                      |             |  |             |       
|Property management                                   |             |  |             | 8,151 
|Leasing                                               |             |  |             | --    
|Administrative - operating                            |             |  |             | 3,067 
|Other                                                 |             |  |             | 319   
|                                                      |             |  |             |       
|Total operating expenses - affiliated                 |             |  |             | 11,537
|                                                      |             |  |             |       
|Professional and administrative expenses - affiliated |             |  |             | --    
|                                                      |             |  |             |       
|Related party transactions capitalized                |             |  |             | --    
|                                                      |             |  |             |       
|Total related party transactions                      |             |  | $           | 25,776
|                                                      |             |  |             |       

During
the three and six months ended June 30, 2004, we were charged an immaterial fee for
property maintenance fees from an affiliate of NTS Devco.

# Note 10 
Commitments and Contingencies

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

21

---

Litigation

On
May 6, 2004, the Superior Court of the State of California for the County of Contra Costa
granted its final approval of the settlement agreement jointly filed by the general
partners (the Former General Partners) of the Partnerships, along with certain
of their affiliates, with the class of plaintiffs in the action originally captioned
Buchanan, et al. v. NTS-Properties Associates, et al. (Case No. C 01-05090) (the
California Litigation) on December 5, 2003. At the final hearing, class
members were given the opportunity to object to the final approval of the settlement
agreement, the entry of a final judgment dismissing with prejudice the California
Litigation, or an application of an award for attorneys fees and expenses to
plaintiffs counsel. The Superior Courts order provided, among other things,
that: (1) the settlement agreement, and all transactions contemplated thereby, including
the merger of the Partnerships into us, were fair, reasonable and adequate, and in the
best interests of the class of plaintiffs; (2) the plaintiffs complaint and each and
every cause of action and claim set forth therein is dismissed with prejudice; and (3)
each class member who did not request to be excluded from the settlement released all
known and unknown claims against the defendants, including those claims being pursued in a
competing class action in Kentucky, which is discussed in further detail below.

On
June 11, 2004, several class members who objected to the settlement agreement but whose
objections were overruled by the Superior Court, filed an appeal in the Court of Appeal of
the State of California, First Appellate District. On July 27, 2005, the Court of Appeal
issued its decision affirming the Superior Courts approval of the settlement, and
rejecting the objectors arguments.

On
February 27, 2003, two individuals filed a class and derivative action in the Circuit
Court of Jefferson County, Kentucky captioned Bohm, et al. v. J.D. Nichols, et al. (Case
No. 03-CI-01740) (the Kentucky Litigation) against certain of the Former
General Partners and several individuals and entities affiliated with us. The complaint
was amended to include the general partner of NTS-Properties III and the general partner
of NTS-Properties Plus Ltd. The plaintiffs are seeking, among other things, compensatory
and punitive damages in an unspecified amount, an accounting, a declaratory judgment and
injunctive relief.

On
March 2, 2004, the Former General Partners filed a motion to dismiss the Kentucky
Litigation. After the motion to dismiss was briefed, the settlement agreement in the
California Litigation (discussed above) received final court approval. Thereby, the
Circuit Court of Jefferson County, Kentucky, instructed the plaintiffs in the Kentucky
Litigation to file an amended complaint in light of the approved settlement of the
California Litigation. The plaintiffs six opt-outs from the California Litigation
filed a corrected second amended complaint on August 11, 2004.

On
February 9, 2005, the Circuit Court instructed the defendants to file a responsive
pleading only as to direct claims asserted by the plaintiffs in the Corrected Second
Amended Complaint. On March 9, 2005, the Former General Partners, along with the other
defendants, filed motions to dismiss the corrected second amended complaint.

On
July 7, 2005, two of the plaintiffs in the Kentucky Litigation voluntarily dismissed their
claims against the defendants. The Former General Partners believe that these dismissals
affect the value and scope of plaintiffs claims. Accordingly, defendants remanded
the hearing on the motion to dismiss originally scheduled for July 15, 2005, in order to
properly advise the Court of the effect of the voluntary dismissals.

We
and our legal counsel believe that the litigation pending in Kentucky is without merit,
and therefore, are continuing to vigorously defend against it. No amounts have been
accrued for the settlement of this action in our financial statements.

We
do not believe there is any other litigation threatened against us other than routine
litigation arising out of the ordinary course of business, some of which is expected to be
covered by insurance, none of which is expected to have a material effect on our financial
position or results of operations.

22

---

Property
Acquisition

On
June 27, 2005, NTS Realty issued a press release to announce that it entered into an
Agreement of Sale (the Agreement) with Great Lakes Property Group Trust to
purchase The Lakes Apartments, located adjacent to Willow Lake Apartments, in
Indianapolis, Indiana. The Lakes is a 230-unit luxury multifamily property consisting of
amenities, including a fitness center, car wash, swimming pool and a lighted tennis court.
During the last six months, The Lakes Apartments occupancy has ranged from 93% to
97%.

Subject
to the terms and conditions of the Agreement, NTS Realty has agreed to pay $16.0 million
for The Lakes Apartments. NTS Realty intends to finance a portion of the purchase price
with a mortgage loan, which is currently being negotiated, and use cash reserves for the
remainder. This acquisition is expected to close in the third quarter of 2005 and is not
expected to produce significant operating results in 2005.

# Note 11  Segment
Reporting

Our
reportable operating segments include  Multifamily, Commercial, Retail and Land Real
Estate Operations. The following unaudited financial information of the operating segments
has been prepared using a management approach, which is consistent with the basis and
manner in which our management internally disaggregates financial information for the
purpose of assisting in making internal operating decisions. We evaluate performance based
on stand-alone operating segment net income or loss. Expenses at the Partnership level are
represented in the non-segment column.

NTS
Realty

|                                | (Unaudited) | 
|------------------------------- | ----------- | 
|
|
|Rental income                   |             | 
|Tenant reimbursements           |             | 
|                                |             | 
|Total revenue                   |             | 
|                                |             | 
|Operating expenses and          |             | 
|operating expenses - affiliated |             | 
|Management fees                 |             | 
|Real estate taxes               |             | 
|Professional and administrative |             | 
|expenses and professional and   |             | 
|administrative expenses -       |             | 
|affiliated                      |             | 
|Depreciation and amortization   |             | 
|                                |             | 
|                                |             | 
|Total operating expenses        |             | 
|                                |             | 
|Operating income (loss)         |             | 
|                                |             | 
|Interest and other income       |             | 
|Interest expense                |             | 
|Loss on disposal of assets      |             | 
|                                |             | 
|Net (loss) income               |             | 
|                                |             | 

23

---

|                                | (Unaudited) | 
|------------------------------- | ----------- | 
|
|
|Rental income                   |             | 
|Tenant reimbursements           |             | 
|                                |             | 
|Total revenue                   |             | 
|                                |             | 
|Operating expenses and          |             | 
|operating expenses - affiliated |             | 
|Management fees                 |             | 
|Real estate taxes               |             | 
|Professional and administrative |             | 
|expenses and professional and   |             | 
|administrative expenses -       |             | 
|affiliated                      |             | 
|Depreciation and amortization   |             | 
|                                |             | 
|Total operating expenses        |             | 
|                                |             | 
|Operating income (loss)         |             | 
|                                |             | 
|Interest and other income       |             | 
|Interest expense                |             | 
|Loss on disposal of assets      |             | 
|                                |             | 
|Net income (loss)               |             | 
|                                |             | 

NTS-Properties
III

NTS-IIIs
reportable operating segments included only one segment  Commercial Real Estate
Operations.

24

---

NTS-Properties
IV

NTS-IVs
reportable operating segments included  Multifamily and Commercial Real Estate
Operations. The multifamily operations represented NTS-IVs ownership and operating
results relative to a multifamily community known as The Willows of Plainview Phase I. The
commercial operations represented NTS-IVs ownership and operating results relative
to suburban commercial office space known as Commonwealth Business Center Phase I and
Plainview Point Office Center Phases I and II.

The
following unaudited financial information of the operating segments was prepared using a
management approach, which was consistent with the basis and manner in which NTS-IVs
management internally disaggregated financial information for the purposes of assisting in
making internal operating decisions. NTS-IVs management evaluated performance based
on stand-alone operating segment net income or loss. Professional and administrative
expenses, depreciation and amortization, interest and other income, interest expense and
joint venture income or loss incurred at the Partnership level were not allocated to the
operating segments.

|                                                       | (Unaudited) | 
|------------------------------------------------------ | ----------- | 
|
|
|Rental income                                          |             | 
|Tenant reimbursements                                  |             | 
|                                                       |             | 
|Total revenue                                          |             | 
|                                                       |             | 
|Operating expenses and operating expenses - affiliated |             | 
|Management fees                                        |             | 
|Real estate taxes                                      |             | 
|Depreciation and amortization                          |             | 
|                                                       |             | 
|Total operating expenses                               |             | 
|                                                       |             | 
|Operating income                                       |             | 
|                                                       |             | 
|Interest and other income                              |             | 
|Interest expense                                       |             | 
|Loss on disposal of assets                             |             | 
|                                                       |             | 
|Net income                                             |             | 
|                                                       |             | 

25

---

|                                                       | (Unaudited) | 
|------------------------------------------------------ | ----------- | 
|
|
|Rental income                                          |             | 
|Tenant reimbursements                                  |             | 
|                                                       |             | 
|Total revenue                                          |             | 
|                                                       |             | 
|Operating expenses and operating expenses - affiliated |             | 
|Management fees                                        |             | 
|Real estate taxes                                      |             | 
|Depreciation and amortization                          |             | 
|                                                       |             | 
|Total operating expenses                               |             | 
|                                                       |             | 
|Operating income                                       |             | 
|                                                       |             | 
|Interest and other income                              |             | 
|Interest expense                                       |             | 
|Loss on disposal of assets                             |             | 
|                                                       |             | 
|Net income                                             |             | 
|                                                       |             | 

A
reconciliation of the totals reported for the operating segments to the applicable line
items in the financial statements is necessary given amounts recorded at the Partnership
level and not allocated to the operating properties for internal reporting purposes:

|                                                      | (Unaudited) | 
|----------------------------------------------------- | ----------- | 
|
|DEPRECIATION AND AMORTIZATION                         |             | 
|Depreciation and amortization for reportable segments |             | 
|Depreciation and amortization for Partnership         |             | 
|                                                      |             | 
|Total depreciation and amortization                   |             | 
|                                                      |             | 
|INTEREST AND OTHER INCOME                             |             | 
|Interest and other income for reportable segments     |             | 
|Interest and other income for Partnership             |             | 
|                                                      |             | 
|Total interest and other income                       |             | 
|                                                      |             | 
|NET INCOME (LOSS)                                     |             | 
|Net income for reportable segments                    |             | 
|Net loss for Partnership (1)                          |             | 
|                                                      |             | 
|Total net loss                                        |             | 
|                                                      |             | 

|1) | The Partnership net loss was primarily composed of professional and
          administrative costs born by the Partnership and also includes any joint venture
          income or loss recorded at the Partnership level and not allocated to the
          operating segments. The professional and administrative costs include the tax
          and public company reporting and compliance costs associated with a public
          limited partnership.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

26

---

NTS-Properties
V

NTS-Vs
reportable operating segments included  Multifamily and Commercial Real Estate
Operations. The multifamily operations represented NTS-Vs ownership and operating
results relative to a multifamily community known as The Willows of Plainview Phase II.
The commercial operations represented NTS-Vs ownership and operating results
relative to suburban commercial office space known as Commonwealth Business Center Phase
II and Lakeshore Business Center Phases I, II and III.

The
following unaudited financial information of the operating segments was prepared using a
management approach, which was consistent with the basis and manner in which NTS-Vs
management internally disaggregated financial information for the purposes of assisting in
making internal operating decisions. NTS-Vs management evaluated performance based
on stand-alone operating segment net income or loss. Professional and administrative
expenses, depreciation and amortization, interest and other income, interest expense and
minority interest income or loss recorded at the Partnership level were not allocated to
the operating segments.

|                                                       | (Unaudited) | 
|------------------------------------------------------ | ----------- | 
|
|
|Rental income                                          |             | 
|Tenant reimbursements                                  |             | 
|                                                       |             | 
|Total revenue                                          |             | 
|                                                       |             | 
|Operating expenses and operating expenses - affiliated |             | 
|Management fees                                        |             | 
|Real estate taxes                                      |             | 
|Depreciation and amortization                          |             | 
|                                                       |             | 
|Total operating expenses                               |             | 
|                                                       |             | 
|Operating income                                       |             | 
|                                                       |             | 
|Interest and other income                              |             | 
|Interest expense                                       |             | 
|Loss on disposal of assets                             |             | 
|                                                       |             | 
|Net (loss) income                                      |             | 
|                                                       |             | 

27

---

|                                                       | (Unaudited) | 
|------------------------------------------------------ | ----------- | 
|
|
|Rental income                                          |             | 
|Tenant reimbursements                                  |             | 
|                                                       |             | 
|Total revenue                                          |             | 
|                                                       |             | 
|Operating expenses and operating expenses - affiliated |             | 
|Management fees                                        |             | 
|Real estate taxes                                      |             | 
|Depreciation and amortization                          |             | 
|                                                       |             | 
|Total operating expenses                               |             | 
|                                                       |             | 
|Operating income                                       |             | 
|                                                       |             | 
|Interest and other income                              |             | 
|Interest expense                                       |             | 
|Loss on disposal of assets                             |             | 
|                                                       |             | 
|Net loss                                               |             | 
|                                                       |             | 

28

---

A
reconciliation of the totals reported for the operating segments to the applicable line
items in the financial statements is necessary given amounts recorded at the Partnership
level and not allocated to the operating properties for internal reporting purposes:

|                                                      | (Unaudited) | 
|----------------------------------------------------- | ----------- | 
|
|DEPRECIATION AND AMORTIZATION                         |             | 
|Depreciation and amortization for reportable segments |             | 
|Depreciation and amortization for Partnership         |             | 
|                                                      |             | 
|Total depreciation and amortization                   |             | 
|                                                      |             | 
|INTEREST AND OTHER INCOME                             |             | 
|Interest and other income for reportable segments     |             | 
|Interest and other income for Partnership             |             | 
|                                                      |             | 
|Total interest and other income                       |             | 
|                                                      |             | 
|INTEREST EXPENSE                                      |             | 
|Interest expense for reportable segments              |             | 
|Interest expense for Partnership                      |             | 
|                                                      |             | 
|Total interest expense                                |             | 
|                                                      |             | 
|NET INCOME (LOSS)                                     |             | 
|Net income (loss) for reportable segments             |             | 
|Net loss for Partnership (1)                          |             | 
|Minority interest income (loss)                       |             | 
|                                                      |             | 
|Total net loss                                        |             | 
|                                                      |             | 

|1) | The Partnership net loss was primarily composed of professional and
          administrative costs born by the Partnership as well as interest and other
          income, depreciation, interest expense and minority interest recorded at the
          Partnership level and not allocated to the operating segments. The professional
          and administrative costs include the tax and public company reporting and
          compliance costs associated with a public limited partnership.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

29

---

NTS-Properties
VI

NTS-VIs
reportable operating segments included  Multifamily and Commercial Real Estate
Operations. The multifamily operations represented NTS-VIs ownership and operating
results relative to the multifamily communities known as Willow Lake Apartments, Park
Place Apartments Phases I and III, Sabal Park Apartments and Golf Brook Apartments. The
commercial operations represented NTS-VIs ownership and operating results relative
to suburban commercial office space known as Plainview Point Office Center Phase III.

The
following unaudited financial information of the operating segments was prepared using a
management approach, which was consistent with the basis and manner in which NTS-VIs
management internally disaggregated financial information for the purposes of assisting in
making internal operating decisions. NTS-VIs management evaluated performance based
on stand-alone operating segment net income or loss. Professional and administrative
expenses, depreciation and amortization, interest and other income, interest expense and
minority interest income or loss recorded at the Partnership level were not allocated to
the operating segments.

|                                                       | (Unaudited) | 
|------------------------------------------------------ | ----------- | 
|
|
|Rental income                                          |             | 
|Tenant reimbursements                                  |             | 
|                                                       |             | 
|                                                       |             | 
|Total revenue                                          |             | 
|                                                       |             | 
|Operating expenses and operating expenses - affiliated |             | 
|Management fees                                        |             | 
|Real estate taxes                                      |             | 
|Depreciation and amortization                          |             | 
|                                                       |             | 
|Total operating expenses                               |             | 
|                                                       |             | 
|Operating income                                       |             | 
|                                                       |             | 
|Interest and other income                              |             | 
|Interest expense                                       |             | 
|Loss on disposal of assets                             |             | 
|                                                       |             | 
|Net income                                             |             | 
|                                                       |             | 

30

---

|                                                       | (Unaudited) | 
|------------------------------------------------------ | ----------- | 
|
|
|Rental income                                          |             | 
|Tenant reimbursements                                  |             | 
|                                                       |             | 
|Total revenue                                          |             | 
|                                                       |             | 
|Operating expenses and operating expenses - affiliated |             | 
|Management fees                                        |             | 
|Real estate taxes                                      |             | 
|Depreciation and amortization                          |             | 
|                                                       |             | 
|Total operating expenses                               |             | 
|                                                       |             | 
|Operating income (loss)                                |             | 
|                                                       |             | 
|Interest and other income                              |             | 
|Interest expense                                       |             | 
|Loss on disposal of assets                             |             | 
|                                                       |             | 
|Net income (loss)                                      |             | 
|                                                       |             | 

A
reconciliation of the totals reported for the operating segments to the applicable line
items in the financial statements is necessary given amounts recorded at the Partnership
level and not allocated to the operating properties for internal reporting purposes:

|                                                      | (Unaudited) | 
|----------------------------------------------------- | ----------- | 
|
|DEPRECIATION AND AMORTIZATION                         |             | 
|Depreciation and amortization for reportable segments |             | 
|Depreciation and amortization for Partnership         |             | 
|                                                      |             | 
|Total depreciation and amortization                   |             | 
|                                                      |             | 
|INTEREST AND OTHER INCOME                             |             | 
|Interest and other income for reportable segments     |             | 
|Interest and other income for Partnership             |             | 
|                                                      |             | 
|Total interest and other income                       |             | 
|                                                      |             | 
|INTEREST EXPENSE                                      |             | 
|Interest expense for reportable segments              |             | 
|Interest expense for Partnership                      |             | 
|                                                      |             | 
|Total interest expense                                |             | 
|                                                      |             | 
|NET INCOME (LOSS)                                     |             | 
|Net income for reportable segments                    |             | 
|Net loss for Partnership (1)                          |             | 
|Minority interest income                              |             | 
|                                                      |             | 
|Total net loss                                        |             | 
|                                                      |             | 

|1) | The Partnerships net loss was primarily composed of professional and
          administrative costs born by the Partnership and also includes interest expense,
          depreciation and minority interest recorded at the Partnership level and not
          allocated to the operating segments. The professional and administrative costs
          include the tax and public company reporting and compliance costs associated
          with a public limited partnership.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

31

---

NTS-Properties
VII

NTS-VIIs
reportable operating segments included only one segment  Multifamily Operations.

NTS
Private Group

The
Groups reportable operating segments included  Land, Retail and Commercial
Real Estate Operations. The retail operations represented the Groups ownership and
operating results relative to Springs Station, Bed, Bath & Beyond and Outlets Mall
properties located in Louisville, Kentucky. The commercial operations represented the
Groups ownership and operating results relative to suburban commercial office space
located in Louisville, Kentucky. The land operations represented the Groups
ownership and operating results relative to a ground lease located in Louisville,
Kentucky.

The
following unaudited financial information of the operating segments was prepared using a
management approach, which was consistent with the basis and manner in which the
Groups management internally disaggregated financial information to assist in making
internal operating decisions. The Groups management evaluated performance based on
stand-alone operating segment net income or loss.

|                                         | (Unaudited) | 
|---------------------------------------- | ----------- | 
|
|
|Rental income                            |             | 
|Tenant reimbursements                    |             | 
|                                         |             | 
|Total revenue                            |             | 
|                                         |             | 
|Operating expenses and operating         |             | 
|expenses - affiliated                    |             | 
|Management fees                          |             | 
|Real estate taxes                        |             | 
|Professional and administrative expenses |             | 
|Depreciation and amortization            |             | 
|                                         |             | 
|Total operating expenses                 |             | 
|                                         |             | 
|Operating (loss) income                  |             | 
|                                         |             | 
|Interest and other income                |             | 
|Interest expense                         |             | 
|                                         |             | 
|Net (loss) income                        |             | 
|                                         |             | 

32

---

|                                         | (Unaudited) | 
|---------------------------------------- | ----------- | 
|
|
|Rental income                            |             | 
|Tenant reimbursements                    |             | 
|                                         |             | 
|Total revenue                            |             | 
|                                         |             | 
|Operating expenses and operating         |             | 
|expenses - affiliated                    |             | 
|Management fees                          |             | 
|Real estate taxes                        |             | 
|Professional and administrative expenses |             | 
|Depreciation and amortization            |             | 
|                                         |             | 
|Total operating expenses                 |             | 
|                                         |             | 
|Operating (loss) income                  |             | 
|                                         |             | 
|Interest and other income                |             | 
|Interest expense                         |             | 
|Loss of disposal of assets               |             | 
|                                         |             | 
|Net (loss) income                        |             | 
|                                         |             | 

Blankenbaker
Business Center 1A

Blankenbaker
Business Center 1As reportable operating segments included only one segment 
Commercial Real Estate Operations.

# Note 12 
Subsequent Event

The Board of Directors of the Company has approved a sale by the  Partnership of an  approximately  2 acre
tract of vacant land  adjoining  the Outlets Mall  property  for a purchase  price equal to $225,000 per acre to an
unaffiliated  third-party  purchaser  pursuant to a contract  dated August 8, 2005.  Pursuant to the same  contract,
two affiliated  entities owned and/or  controlled  directly or indirectly by J.D.  Nichols,  Director and Chairman,
and Brian F. Lavin,  Director,  Chief Executive Officer and President of our Managing General Partner,  have agreed
to sell an adjoining tract of land to the same  unaffiliated  third-party  purchaser at the same per-acre  purchase
price and on the same terms and conditions as the sale of our property.  The unaffiliated third-party  purchaser  would
not have  agreed to purchase  our  property umless it was also sold simultaneously with the tract owned by the afffiliated
entities.  Our  property  has a carrying  value of approximately  $115,000 and is included in land,  buildings  and  amenities
on our balance  sheet at June 30, 2005.  Closing is expected to occur by year-end 2005,  subject to the purchasers due
diligence  results.  The Partnership will have the right to repurchase  our property from the purchaser in the event
construction  has not commenced on the tract within 2 years of delivery of the deed.

33

---

# ITEM 2 
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For
the Managements Discussion and Analysis of Financial Condition and Results of
Operations (MD&A), financial information for the three and six months
ended June 30, 2004 was treated as if the Partnerships, ORIG and the NTS Private Group
were combined on a historical basis.

The
following discussion should be read in conjunction with the financial statements and
historical financial statements appearing in Item 1 and the cautionary statements below.
This discussion treats our statements of operations and cash flow information for the
three and six months ended June 30, 2004 as if it were combined with our predecessors.

# Critical Accounting
Policies

General

A
critical accounting policy is one that would materially affect our operations or financial
condition, and requires management to make estimates or judgments in certain
circumstances. These judgments often result from the need to make estimates about the
effect of matters that are inherently uncertain. Critical accounting policies discussed in
this section are not to be confused with accounting principles and methods disclosed in
accordance with U.S. generally accepted accounting principles (GAAP). GAAP
requires information in financial statements about accounting principles, methods used and
disclosures pertaining to significant estimates. The following disclosure discusses
judgments known to management pertaining to trends, events or uncertainties known which
were taken into consideration upon the application of those policies and the likelihood
that materially different amounts would be reported upon taking into consideration
different conditions and assumptions.

Distribution
Policy

We
pay distributions if and when authorized by our managing general partner. We are required
to pay distributions on a quarterly basis, commencing in the first quarter of 2005, equal
to sixty-five percent (65%) of our net cash flow from operations as this term
is defined in regulations promulgated by the Treasury Department under the Internal
Revenue Code of 1986, as amended; provided that if a law is enacted or existing law is
modified or interpreted in a manner that subjects us to taxation as a corporation or
otherwise subjects us to entity level taxation for federal, state or local income tax
purposes, we will adjust the amount distributed to reflect our obligation to pay tax. Any
distribution other than a distribution with respect to the final quarter of a calendar
year shall be made no later than forty-five (45) days after the last day of such quarter
based on our estimate of net cash flow from operations for the year. Any
distribution with respect to the final quarter of a calendar year shall be made no later
than ninety (90) days after the last day of such quarter based on actual net cash
flow from operations for the year, adjusted for any excess or insufficient
distributions made with respect to the first three quarters of the calendar year.

Net
cash flow from operations may be reduced by the amount of reserves as determined by
us each quarter. NTS Realty Capital will establish these reserves for, among other things,
working capital or capital improvement needs. Therefore, there is no assurance that we
will have net cash flow from operations from which to pay distributions in the
future. For example, our partnership agreement permits our managing general partner to
reinvest sales or refinancing proceeds in new and existing properties or to create
reserves to fund future capital expenditures. Because net cash flow from
operations is calculated after reinvesting sales or refinancing proceeds or
establishing reserves, we may not have any net cash flow from operations from
which to pay distributions.

Impairment
and Valuation

Statement
of Financial Accounting Standards (SFAS) No. 144 Accounting for the
Impairment or Disposal of Long-Lived Assets, specifies circumstances in which
certain long-lived assets must be reviewed for impairment. If this review indicates that
the carrying amount of an asset exceeds the sum of its expected future cash flows, the
assets carrying value must be written down to fair value. In determining the value
of an investment property and whether the investment property is impaired, management
considers several factors such as projected rental and vacancy rates, property operating
expenses, capital expenditures and interest rates. The capitalization rate

34

---

used to
determine property valuation is based on among others, the market in which the investment
property is located, length of leases, tenant financial strength, the economy in general,
demographics, environment, property location, visibility, age and physical condition. All
of these factors are considered by management in determining the value of any particular
investment property. The value of any particular investment property is sensitive to the
actual results of any of these factors, either individually or taken as a whole. If the
actual results differ from managements judgment, the valuation could be negatively
or positively affected.

The
merger was accounted for using the purchase method of accounting in accordance with SFAS
No. 141 Business Combinations. NTS Realty was treated as the purchasing
entity. The portion of each partnerships assets and liabilities acquired from
unaffiliated third parties was adjusted to reflect its fair market value. That portion
owned by affiliates of the general partners of the Partnerships was reflected at
historical cost. The assets and liabilities contributed by NTS Private Group were adjusted
to reflect their fair market value, except for that portion owned by Mr. Nichols, which
was reflected at historical cost due to his common control over the contributing entities.

In
accordance with SFAS No. 141, we have allocated the purchase price of each acquired
investment property among land, buildings and improvements, other intangibles, including
acquired above market leases, acquired below market leases and acquired in place lease
origination cost, which is the market cost avoidance of executing the acquired leases.
Allocation of the purchase price is an area that requires complex judgments and
significant estimates. We used the information contained in a third party appraisal as the
primary basis for allocating the purchase price between land and buildings. A pro rata
portion of the purchase price was allocated to the value of avoiding a lease-up period for
acquired in-place leases. The value of in-place leases is amortized to expense over the
remaining current term of the respective leases. A portion of the purchase price was
allocated to the estimated lease origination cost based on estimated lease execution costs
for similar leases and considered various factors including geographic location and size
of leased space. We then evaluated acquired leases based upon current market rates at the
acquisition date and various other factors including geographic location, size and the
location of leased space within the property, tenant profile and the credit risk of the
tenant in determining whether the acquired lease is above or below market. After acquired
leases were determined to be at, above or below market, we allocated a pro rata portion of
the purchase price to any acquired above or below market lease based upon the present
value of the difference between the contractual lease rate and the estimated market rate.
We also consider an allocation of purchase price to in-place leases that have a customer
relationship intangible value. The characteristics we consider in allocating these values
include the nature and extent of existing business relationships with the tenant, growth
prospects for developing new business with the tenant and the tenants credit quality
and expectations of lease renewals. We currently do not have any tenants with whom we have
developed a relationship that we believe has any current intangible value.

Recognition
of Rental Income

Under
GAAP, we are required to recognize rental income based on the effective monthly rent for
each lease. The effective monthly rent is equal to the average monthly rent during the
term of the lease, not the stated rent for any particular month. The process, known as
straight-lining or stepping rent generally has the effect of
increasing rental revenues during the early phases of a lease and decreasing rental
revenues in the latter phases of a lease. Due to the impact of
straight-lining, on a historical combining basis, rental income exceeded the
cash collected for rent by approximately $108,000 and $441,000, respectively for the three
and six months ended June 30, 2005. If rental income calculated on a straight-line basis
exceeds the cash rent due under the lease, the difference is recorded as an increase in
deferred rent receivable and included as a component of accounts receivable on the
relevant balance sheet. If the cash rent due under the lease exceeds rental income
calculated on a straight-line basis, the difference is recorded as a decrease in deferred
rent receivable and is recorded as a decrease of accounts receivable on the relevant
balance sheet. We defer recognition of contingent rental income, such as percentage or
excess rent, until the specified target that triggers the contingent rental income is
achieved. We periodically review the collectability of outstanding receivables. Allowances
are generally taken for tenants with outstanding balances due for a period greater than
ninety days and tenants with outstanding balances due for a period less than ninety days
but that we believe are potentially uncollectible.

35

---

Recognition
of Lease Termination Income

We
recognize lease termination income upon receipt of the income. We accrue lease termination
income if there is a signed termination agreement, all of the conditions of the agreement
have been met and the tenant is no longer occupying the property.

Cost
Capitalization and Depreciation Policies

We
review all expenditures and capitalize any item exceeding $1,000 deemed to be an upgrade
or a tenant improvement with an expected useful life greater than one year. Land,
buildings and amenities are stated at cost. Depreciation expense is computed using the
straight-line method over the estimated useful lives of the assets. Buildings and
improvements have estimated useful lives between 5-30 years, land improvements have
estimated useful lives between 7-30 years and amenities have estimated useful lives
between 5-30 years. Acquired above and below market leases are amortized on a
straight-line basis over the life of the related leases as an adjustment to rental income.
Acquired in place lease origination cost is amortized over the life of the lease as a
component of amortization expense.

# Results of Operations

This
section describes our results of operations for the three and six months ended June 30,
2004 as if it were combined with our Predecessors operations without adjustment. As
of June 30, 2005, we owned nineteen office and business centers, nine multifamily
properties, three retail properties and one ground lease. We generate substantially all of
our operating income from property operations.

Net
loss for the three months ended June 30, 2005 and 2004 was approximately $(573,853) and
$(177,615), respectively. The increased net loss is primarily due to increased operating
expenses and interest expense, partially offset by decreased legal and professional
expenses related to the merger and class action litigation as well as increased revenues.
The net loss for the six months ended June 30, 2005 and 2004 was approximately
$(1,062,127) and $(1,099,200), respectively. The decreased net loss is primarily due to
decreased legal and professional expenses related to the merger and class action
litigation, as well as increased revenues and other income.

Occupancy
levels at our properties by segment as of June 30, 2005 and 2004 were as follows:

|            | June 30, 2005 |  | June 30, 2004 |     
|----------- | ------------- |  | ------------- | ----
|Commercial  |               |  |               | 84% 
|Multifamily |               |  |               | 92% 
|Retail      |               |  |               | 100%
|Land        |               |  |               | N/A 

We
believe the changes in occupancy on June 30 from year to year are temporary effects of
each propertys specific mix of lease maturities and are not indicative of any known
trend or uncertainty.

The
average occupancy levels at our properties by segment for the three and six months ended
June 30, 2005 and 2004 were as follows:

|            | Three Months Ended |  | Six Months Ended
|----------- | ------------------ |  | ----------------
|
|Commercial  |                    |  |                 
|Multifamily |                    |  |                 
|Retail      |                    |  |                 
|Land        |                    |  |                 

We
believe the changes in average occupancy from period to period are temporary effects of
each propertys specific mix of lease maturities and are not indicative of any known
trend or uncertainty.

36

---

The
leasing and renewal negotiations for our commercial properties are primarily handled by
leasing agents that are employees of NTS Development Company. All advertising for the
commercial properties is coordinated by NTS Development Companys marketing staff
located in Louisville, Kentucky.

In
an effort to continue to improve occupancy at our multifamily properties, we have on-site
leasing staff, who are employees of NTS Development Company, at each of the multifamily
properties. The staff handles all on-site visits from potential tenants, coordinates local
advertising with NTS Development Companys marketing staff, makes visits to local
companies to promote fully furnished apartments, and negotiates lease renewals with
current residents.

The
following discussion relating to changes in our results of operations includes only
material line items within our Statements of Operations or line items for which there was
a material change between the three and six months ended June 30, 2005 and 2004.

Rental
Income and Tenant Reimbursements

Rental
income and tenant reimbursements for the three months ended June 30, 2005 and 2004 were
approximately $8,802,000 and $8,363,000, respectively. The increase of $439,000, or 5%,
was primarily the result of increased revenues in the commercial and multifamily segments.
The commercial segment increase was primarily the result of increased average occupancy at
Atrium Center, Lakeshore Business Center Phase III, Peachtree Corporate Center, Plainview
Point Office Center Phase III and Plainview Center, as well as decreased free rent at
Lakeshore Business Center Phase III. The commercial segment increase is partially offset
by decreased average occupancy at Commonwealth Business Center Phase I, Lakeshore Business
Center Phases I and II, Springs Medical Office Center and Plainview Point Office Center
Phases I and II. The multifamily segment increase was primarily due to increased average
occupancy at Park Place Apartments Phases I, II and III, The Willows of Plainview Phase
II, The Park at the Willows and Sabal Park Apartments, partially offset by decreased
average occupancy at The Willows of Plainview Phase I and Willow Lake Apartments and
decreased average rent per unit at The Willows of Plainview Phases I and II and Park Place
Apartments Phases I and III.

Rental
income and tenant reimbursements for the six months ended June 30, 2005 and 2004 were
approximately $17,386,000 and $16,653,000, respectively. The increase of $733,000, or 4%,
was primarily the result of increased revenues in the commercial and multifamily segments.
The commercial segment increase was primarily the result of increased average occupancy at
Plainview Point Office Center Phase III, Atrium Center, Lakeshore Business Center Phase
III, Peachtree Corporate Center and Plainview Center, as well as decreased free rent at
Lakeshore Business Center Phase III. The commercial segment increase is partially offset
by decreased average occupancy at Commonwealth Business Center Phase I, Lakeshore Business
Center Phase I, Springs Medical Office Center and Plainview Point Office Center Phases I
and II, as well as increased free rent for Blankenbaker Business Center 1A and 1B. The
multifamily segment increase was primarily the result of increased average occupancy at
Park Place Apartments Phases I and II, Golf Brook Apartments and Sabal Park Apartments, as
well as increased average rent per unit at Golf Brook Apartments, Sabal Park Apartments,
Park Place Apartments Phase II and The Park at the Willows. The multifamily segment
increase is partially offset by decreased average occupancy at The Willows of Plainview
Phase I and Willow Lake Apartments, as well as decreased average rent per unit at The
Willows of Plainview Phases I and II, Willow Lake Apartments and Park Place Apartments
Phases I and III.

Quarter-ending
occupancy percentages represent occupancy only on a specific date; therefore, the above
analysis considers average occupancy percentages, which are more representative of the
period-to-period results.

37

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Operating
Expenses and Operating Expenses  Affiliated

Operating
expenses for the three months ended June 30, 2005 and 2004 were approximately $2,186,000
and $1,986,000, respectively. The increase of $200,000, or 10%, was primarily due to our
multifamily segment, which included increased repairs and maintenance expenses at all of
our multifamily properties, increased landscaping expense at Sabal Park Apartments,
increased utilities expense at The Willows of Plainview Phases I and II and The Park at
the Willows, as well as increased tax consulting fees at Park Place Apartments Phases I,
II and III. The multifamily segment increase was partially offset by decreased landscaping
expenses at Park Place Apartments Phases I, II and III.

Operating
expenses for the six months ended June 30, 2005 and 2004 were approximately $4,281,000 and
$4,042,000, respectively. The increase of $239,000, or 6%, was primarily due to our
multifamily segment, which included increased landscaping expenses at Sabal Park
Apartments, Golf Brook Apartments, Park Place Apartments Phases I, II and III and Willow
Lake Apartments, increased repairs and maintenance expenses at all of our multifamily
properties, partially offset by decreased tax consulting fees at Willow Lake Apartments.

Operating
expenses-affiliated for the three months ended June 30, 2005 and 2004 were approximately
$990,000 and $996,000, respectively. The decrease of $6,000 was not a significant change
and is not indicative of any known trend or uncertainty. There were no offsetting material
changes. Operating expenses-affiliated for the six months ended June 30, 2005 and 2004
were approximately $1,970,000 and $2,073,000, respectively. The decrease of $103,000, or
5%, was primarily due to a decrease in personnel costs for our commercial segment.

Operating
expenses  affiliated are for the services performed by employees of NTS Development
Company, an affiliate of our general partners. These employee services include property
management, leasing, maintenance, security and other services necessary to manage and
operate our business.

Management
Fees

Management
fees for the three months ended June 30, 2005 and 2004 were approximately $424,000 and
$460,000, respectively. Management fees for the six months ended June 30, 2005 and 2004
were approximately $813,000 and $906,000, respectively. The decreases of $36,000, or 8%,
and $93,000, or 10%, respectively, were primarily the result of a change in the management
fee calculation pursuant to the terms of an agreement with NTS Development Company.

Real
Estate Taxes

Real
estate taxes for the three months ended June 30, 2005 and 2004 were approximately $582,000
and $447,000, respectively. Real estate taxes for the six months ended June 30, 2005 and
2004 were approximately $1,144,000 and $925,000, respectively. The increases of $135,000,
or 30%, and $219,000, or 24%, respectively, were primarily the result of reduced periodic
expense in 2004 due to adjustments to the accrued tax liability for the reduction of the
tax assessments at Willow Lake Apartments.

Professional
and Administrative Expenses and Professional and Administrative Expenses  Affiliated

Professional
and administrative expenses for the three months ended June 30, 2005 and 2004 were
approximately $786,000 and $703,000, respectively. The increase of $83,000, or 12%, was
primarily the result of increased administrative costs incurred by NTS Realty, partially
offset by decreased legal and professional fees in relation to the merger and to the class
action litigation.

Professional
and administrative expenses for the six months ended June 30, 2005 and 2004 were
approximately $1,525,000 and $1,802,000, respectively. The decrease of $277,000, or 15%,
was primarily due to decreased legal and professional fees related to the merger and to
the class action litigation, partially offset by increased administrative expenses
incurred by NTS Realty. Professional and administrative expenses for the six months ended
June 30, 2005 included approximately $141,000 and $510,000 in merger and litigation
expenses, respectively. Professional and administrative expenses for the six months ended
June 30, 2004 included approximately $941,000 and $475,000 in merger and litigation
expenses, respectively.

38

---

Professional
and administrative expenses  affiliated for the three months ended June 30, 2005 and
2004 were approximately $344,000 and $284,000, respectively. Professional and
administrative expenses  affiliated for the six months ended June 30, 2005 and 2004
were approximately $697,000 and $538,000, respectively. The increases of $60,000, or 21%,
and $159,000, or 30%, were primarily due to increased personnel costs at all of our
properties.

Professional
and administrative expenses  affiliated are for the services performed by employees
of NTS 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  affiliated consisted of the following:

|                   | Three Months Ended |  | Six Months Ended |        
|------------------ | ------------------ |  | ---------------- | -------
|
|Finance            |                    |  | $                | 91,000 
|Accounting         |                    |  |                  | 152,000
|Investor Relations |                    |  |                  | 54,000 
|Human Resources    |                    |  |                  | 3,000  
|Overhead           |                    |  |                  | 44,000 
|                   |                    |  |                  |        
|Total              |                    |  | $                | 344,000
|                   |                    |  |                  |        

Depreciation
and Amortization

Depreciation
and amortization expenses for the three months ended June 30, 2005 and 2004 were
approximately $2,129,000 and $2,000,000, respectively. Depreciation and amortization
expenses for the six months ended June 30, 2005 and 2004 were approximately $4,272,000 and
$4,072,000, respectively. The increases of $129,000, or 6%, and $200,000, or 5%,
respectively, were primarily due to the amortization of intangible assets, partially
offset by the revision of our fixed asset lives subsequent to their acquisition by NTS
Realty.

Interest
Expense

Interest
expense for the three months ended June 30, 2005 and 2004 was approximately $1,926,000 and
$1,740,000, respectively. Interest expense for the six months ended June 30, 2005 and 2004
was approximately $3,753,000 and $3,507,000, respectively. The increases of $186,000, or
11%, and $246,000, or 7%, respectively, were primarily due to additional loan proceeds
obtained in December 2004 and March 2005. The increases are partially offset by lowered
interest rates and extended amortization schedules due to refinancing approximately $94.0
million of debt.

Loss
on Disposal of Assets

The
loss on disposal of assets for the three and six months ended June 30, 2005 can be
attributed to assets that were not fully depreciated at the time of replacement spread
amongst the majority of our properties. These replacements include heating and air
conditioning units, stairwell upgrades, lighting upgrades and fire sprinkler replacements,
among others.

39

---

# Liquidity and Capital
Resources

Our
most liquid asset is our cash and equivalents, which consist of cash and short-term
investments, but do not include any restricted cash. Operating income generated by the
properties will be the primary source from which we generate cash. Other sources of cash
include the proceeds from mortgage loans and notes payable. Our main uses of cash will
relate to capital expenditures, required payments of mortgages and notes payable,
distributions and property taxes.

|                                     | Six Months Ended | 
|------------------------------------ | ---------------- | 
|
|Operating activities                 |                  | 
|Investing activities                 |                  | 
|Financing activities                 |                  | 
|                                     |                  | 
|Net increase in cash and equivalents |                  | 
|                                     |                  | 

Cash
Flow from Operating Activities

Net
cash provided by operating activities decreased from approximately $4,838,000 to
$2,137,000 for the six months ended June 30, 2004 and 2005, respectively. The decrease was
primarily a result of cash used to pay accounts payable.

Cash
Flow from Investing Activities

Net
cash used in investing activities increased from approximately $1,064,000 to $4,988,000
for the six months ended June 30, 2004 and 2005, respectively. The increase was primarily
due to externally escrowing $2,000,000 for specific capital expenditures at Blankenbaker
Business Center 1A and 1B. The increase was also the result of increased capital
expenditures, which included roof replacements at Willow Lake Apartments, Park Place
Apartments Phases I and II and Blankenbaker Business Center II, HVAC replacements at
Blankenbaker Business Center 1A and 1B, tenant improvements at Commonwealth Business
Center Phase I, Springs Office Center, Blankenbaker Business Center 1A and 1B and
Lakeshore Business Center Phase II, vacant suite improvements at Atrium Center and
Lakeshore Business Center Phases I and II and lobby renovations at Atrium Center.

Cash
Flow from Financing Activities

For
the six months ended June 30, 2004, we used approximately $3,246,000 in net cash from
financing activities. Net cash provided by financing activities was approximately
$12,998,000 for the six months ended June 30, 2005. The change was primarily the result of
$30,000,000 in loan proceeds obtained in March 2005. The increase is partially offset by
the payoff of the revolving note payable of approximately $14,971,000.

Future
Liquidity

Our
future liquidity depends significantly on our properties occupancy remaining at a
level which provides for debt payments and adequate working capital, currently and in the
future. If occupancy were to fall below that level and remain at or below that level for a
significant period of time, our ability to make payments due under our debt agreements and
to continue paying daily operational costs would be greatly impaired. In the next twelve
months, we intend to operate the properties in a similar manner to their operation in
recent years. Cash reserves which consist of unrestricted cash as shown on our balance
sheet were approximately $12,721,000 on June 30, 2005. As part of the merger, we
refinanced approximately $94.0 million of debt with approximately $119.0 million of new
debt. The refinancing, among other things, lowered interest rates and extended the
amortization schedules. The refinancing of this debt allowed us to generate cash flow to
pay capital expenditures, principal and interest expenses from mortgages and notes payable
and deferred fees and expenses to NTS Development Company. Subject to our distribution
policy, we anticipate making quarterly distributions to our limited partners.

40

---

On
April 14, 2005, NTS Realty announced that the board of directors of its managing general
partner, NTS Realty Capital, Inc., approved a quarterly distribution of $0.10 per unit on
NTS Realtys limited partnership units. The distribution was paid on May 13, 2005, to
limited partners of record at the close of business on April 27, 2005.

On
June 14, 2005, NTS Realty announced that the board of directors of its managing general
partner, NTS Realty Capital, Inc., approved another quarterly distribution of $0.10 per
unit on NTS Realtys limited partnership units. The distribution was paid on July 15,
2005, to limited partners of record at the close of business on June 30, 2005.

We
expect to incur capital expenditures of approximately $7.3 million during the next twelve
months primarily for tenant origination costs necessary to continue leasing our
properties. This discussion of future liquidity details our material commitments.

Property
Acquisition

On
June 27, 2005, NTS Realty issued a press release to announce that it entered into an
Agreement of Sale (the Agreement) with Great Lakes Property Group Trust to
purchase The Lakes Apartments, located adjacent to Willow Lake Apartments, in
Indianapolis, Indiana. The Lakes is a 230-unit luxury multifamily property consisting of
amenities, including a fitness center, car wash, swimming pool and a lighted tennis court.
During the last six months, The Lakes Apartments occupancy has ranged from 93% to
97%.

Subject
to the terms and conditions of the Agreement, NTS Realty has agreed to pay $16.0 million
for The Lakes Apartments. NTS Realty intends to finance a portion of the purchase price
with a mortgage loan, which is currently being negotiated, and use cash reserves for the
remainder. This acquisition is expected to close in the third quarter of 2005 and is not
expected to produce significant operating results in 2005. We expect the acquisition to be
accretive to operating results and our cash available for distributions in 2006.

# Website Information

Our
website address is www.ntsdevelopment.com. Our annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or
furnished pursuant to Section 13(a) of the Securities Exchange Act are available and may
be accessed free of charge through the About NTS section of our website as
soon as reasonably practicable after we electronically file this material with, or furnish
it to, the SEC. Our website and the information contained therein or connected thereto are
not incorporated into this Quarterly Report on Form 10-Q.

# ITEM 3 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our
primary market risk exposure with regard to financial instruments is expected to be our
exposure to changes in interest rates. We refinanced substantially all of our debt
acquired at the time of our merger with instruments which bear interest at a fixed rate
with the exception of an approximate $14.0 million mortgage payable. We anticipate that a
hypothetical 100 basis point increase in interest rates would result in an approximate
$6,800,000 decrease in the fair value of our fixed rate debt while increasing interest
expense on our variable rate debt by approximately $139,000 annually.

# ITEM 4  CONTROLS
AND PROCEDURES

Our
managing general partner established disclosure controls and procedures to ensure that our
material information is made known to the officers of our managing general partner who
certify our financial reports, to our management and to the board of directors of our
managing partner.

As
of June 30, 2005, our managing general partners Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls and procedures are effective
to ensure that the information required to be disclosed by us in the reports that we file
or submit under Securities and Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in SEC rules and forms.

41

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# PART II  OTHER
INFORMATION

# ITEM 1  LEGAL
PROCEEDINGS

On
May 6, 2004, the Superior Court of the State of California for the County of Contra Costa
granted its final approval of the settlement agreement jointly filed by the general
partners (the Former General Partners) of the Partnerships, along with certain
of their affiliates, with the class of plaintiffs in the action originally captioned
Buchanan, et al. v. NTS-Properties Associates, et al. (Case No. C 01-05090) (the
California Litigation) on December 5, 2003. At the final hearing, class
members were given the opportunity to object to the final approval of the settlement
agreement, the entry of a final judgment dismissing with prejudice the California
Litigation, or an application of an award for attorneys fees and expenses to
plaintiffs counsel. The Superior Courts order provided, among other things,
that: (1) the settlement agreement, and all transactions contemplated thereby, including
the merger of the Partnerships into us, were fair, reasonable and adequate, and in the
best interests of the class of plaintiffs; (2) the plaintiffs complaint and each and
every cause of action and claim set forth therein is dismissed with prejudice; and (3)
each class member who did not request to be excluded from the settlement released all
known and unknown claims against the defendants, including those claims being pursued in a
competing class action in Kentucky, which is discussed in further detail below.

On
June 11, 2004, several class members who objected to the settlement agreement but whose
objections were overruled by the Superior Court, filed an appeal in the Court of Appeal of
the State of California, First Appellate District. On July 27, 2005, the Court of Appeal
issued its decision affirming the Superior Courts approval of the settlement, and
rejecting the objectors arguments.

On
February 27, 2003, two individuals filed a class and derivative action in the Circuit
Court of Jefferson County, Kentucky captioned Bohm, et al. v. J.D. Nichols, et al. (Case
No. 03-CI-01740) (the Kentucky Litigation) against certain of the Former
General Partners and several individuals and entities affiliated with us.  The
complaint was amended to include the general partner of NTS-Properties III and the general
partner of NTS-Properties Plus Ltd. The plaintiffs are seeking, among other things,
compensatory and punitive damages in an unspecified amount, an accounting, a declaratory
judgment and injunctive relief.

On
March 2, 2004, the Former General Partners filed a motion to dismiss the Kentucky
Litigation. After the motion to dismiss was briefed, the settlement agreement in the
California Litigation (discussed above) received final court approval. Thereby, the
Circuit Court of Jefferson County, Kentucky, instructed the plaintiffs in the Kentucky
Litigation to file an amended complaint in light of the approved settlement of the
California Litigation. The plaintiffs six opt-outs from the California Litigation
filed a corrected second amended complaint on August 11, 2004.

On
February 9, 2005, the Circuit Court instructed the defendants to file a responsive
pleading only as to direct claims asserted by the plaintiffs in the Corrected Second
Amended Complaint. On March 9, 2005, the Former General Partners, along with the other
defendants, filed motions to dismiss the corrected second amended complaint.

On
July 7, 2005, two of the plaintiffs in the Kentucky Litigation voluntarily dismissed their
claims against the defendants. The Former General Partners believe that these dismissals
affect the value and scope of plaintiffs claims. Accordingly, defendants remanded
the hearing on the motion to dismiss originally scheduled for July 15, 2005, in order to
properly advise the Court of the effect of the voluntary dismissals.

We
and our legal counsel believe that the litigation pending in Kentucky is without merit,
and therefore, are continuing to vigorously defend against it. No amounts have been
accrued for the settlement of this action in our financial statements.

ITEM 2 
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.

42

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ITEM 3  DEFAULTS
UPON SENIOR SECURITIES
None.

ITEM 4  SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.

ITEM 5  OTHER
INFORMATION 
Not Applicable.

ITEM 6  EXHIBITS

|Exhibit No. | 
|----------- | 
|2.01        | 
|            | 
|2.02        | 
|            | 
|3.01        | 
|            | 
|3.02        | 
|            | 
|3.03        | 
|            | 
|3.04        | 
|            | 
|10.01       | 
|            | 
|10.02       | 
|            | 
|14.01       | 
|            | 
|31.1        | 
|            | 
|31.2        | 
|            | 
|32.1        | 
|            | 
|32.2        | 
|            | 
|99.1        | 
|            | 
|99.2        | 
|            | 
|            | 
|            | 
|(1)         | 
|(2)         | 
|(3)         | 
|(4)         | 
|(5)         | 
|(6)         | 
|(7)         | 
|(8)         | 

43

---

# SIGNATURES

Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has
duly caused this report to be 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 Chied Executive Officer
                            Date: August 15, 2005

44