Table of Contents

 

 

 

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

**(Mark One)**

 

**x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the quarterly period ended March 31, 2011**

 

**OR**

 

**o  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the transition period from                              to                            **

 

**Commission file number 001-32389**

 

**NTS REALTY HOLDINGS LIMITED PARTNERSHIP**

(Exact name of registrant as specified in its charter)

 

| **Delaware**                                              | ** ** | **41-2111139**                         |
|-----------------------------------------------------------|------------|----------------------------------------|
| (State   of incorporation or organization)                |       | (I.R.S.   Employer Identification No.) |
|                                                      |       |                                   |
| **10172   Linn Station Road**

**Louisville,   Kentucky** | ** ** | **40223**                              |
| (Address of principal executive offices)                  |       | (Zip Code)                             |

 

**(502) 426-4800**

(Registrant’s telephone number, including area code)

 

**Not applicable**

(Former name, former address and former fiscal year, if changed since last report)

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o  No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

 

| Large accelerated filer o |   | Accelerated filer o         |
|--------------------------------|--------|----------------------------------|
|                           |   |                             |
| Non-accelerated filer o   |   | Smaller reporting company x |

 

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

 

**APPLICABLE ONLY TO CORPORATE ISSUERS**

 

As of May 5, 2011, there were 11,380,760 of the registrant’s limited partnership units outstanding.

 

 

 

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**NTS REALTY HOLDINGS LIMITED PARTNERSHIP**

 

**FORM 10-Q**

 

**TABLE OF CONTENTS**

 
| **PART I — FINANCIAL INFORMATION** | **4**                                                                                                                   |
|----------------------------------------------|-------------------------------------------------------------------------------------------------------------------------|
| ** **                                   | ** **                                                                                                              |
| Item 1                                       | Financial   Statements                                                                                                  | 4 |
|                                         | Condensed Consolidated   Balance Sheets as of March 31, 2011 (Unaudited) and December 31,   2010              | 4 |
|                                         | Condensed Consolidated   Statement of Equity as of March 31, 2011 (Unaudited)                                      | 4 |
|                                         | Condensed Consolidated   Statements of Operations for the Three Months Ended March 31, 2011 and   2010 (Unaudited) | 5 |
|                                         | Condensed Consolidated   Statements of Cash Flows for the Three Months Ended March 31, 2011 and   2010 (Unaudited) | 6 |
|                                         | Notes to   Condensed Consolidated Financial Statements                                                                  | 7 |
| Item 2                                       | Management’s   Discussion and Analysis of Financial Condition and Results of Operations                            | 19 |
| Item 3                                       | Quantitative   and Qualitative Disclosures About Market Risk                                                            | 27 |
| Item   4                                     | Controls   and Procedures                                                                                               | 27 |
|                                         |                                                                                                                    |   |
| **PART II — OTHER   INFORMATION**  | **28**                                                                                                                  |
| ** **                                   |                                                                                                                    | ** ** |
| Item   1                                     | Legal   Proceedings                                                                                                     | 28 |
| Item 1A                                      | Risk   Factors                                                                                                          | 28 |
| Item 2                                       | Unregistered   Sales of Equity Securities and Use of Proceeds                                                           | 28 |
| Item 3                                       | Defaults   Upon Senior Securities                                                                                       | 28 |
| Item 4                                       | Removed and   Reserved                                                                                                  | 28 |
| Item   5                                     | Other   Information                                                                                                     | 28 |
| Item 6                                       | Exhibits                                                                                                                | 29 |
| Signatures                                   |                                                                                                                    | 31 |
|                                              |                                                                                                                         |  |  |

 

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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”), constitute “forward-looking statements”. These forward-looking statements include discussion and analysis of our financial condition, including our ability to rent space on favorable terms, our ability to address debt maturities and fund our liquidity  requirements, the value of our assets, our anticipated capital expenditures, the amount and timing of anticipated future cash distributions to our unit holders and other matters.  Words such as “may,” “anticipates,” “expects,” “intends,” “plans,” “believes” “seeks,” “estimates,” “would,” “could,” “should,” and variations of these words and similar expressions are intended to identify forward-looking statements and indicate that it is possible that the event may not occur.  If these events do not occur, the result, which we expected, also may, or may not, occur in a different manner, which may be more or less favorable to us.  We do not undertake any obligation to update these forward-looking statements.

 

Any forward-looking statements included in MD&A, or elsewhere in this report, are not historical facts, but reflect the intent, belief or current expectations of our managing general partner based on its knowledge and understanding of the business and industry, the economy and other future conditions only as of the date of this report and may ultimately prove to be incorrect or false.  These statements are not guarantees of future performance, and we caution unit holders not to place undue reliance on forward-looking statements. Actual results could differ materially from those expressed or forecast in any forward-looking statements as a result of a number of factors, including but not limited to the factors listed and described under “Rick Factors” in our filings with the Securities and Exchange Commission (the “SEC”), particularly our most recent Annual Report on Form 10-K, for the year ended December 31, 2010, as filed with the SEC on March 31, 2011.

 

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**PART I — FINANCIAL INFORMATION**

 

**Item 1 — Financial Statements**

 

**NTS REALTY HOLDINGS LIMITED PARTNERSHIP**

Condensed Consolidated Balance Sheets as of March 31, 2011 (Unaudited) and December 31, 2010

 
| ** **                                                                                                                                              | ** ** | **(Unaudited)**              | ** **  | ** **                      | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|-------------|---------------------------------|------------|
| ** **                                                                                                                                              | ** ** | **March 31, 2011** | ** **  | **December 31, 2010** | ** ** |
| **ASSETS:**                                                                                                                                             | ** ** | ** **                   |        |                            |       |
| Cash and equivalents                                                                                                                                    |       | $                            | 691,974     |                            | $          | 180,053 |   |
| Cash and equivalents - restricted                                                                                                                       |       | 2,257,066                    |        | 2,272,598                       |       |
| Accounts receivable, net of allowance for doubtful   accounts of $423,481 at March 31, 2011 and $397,627 at December 31,   2010, respectively |       | 1,471,789                    |        | 1,558,987                       |       |
| Land, buildings and amenities, net                                                                                                                      |       | 310,046,729                  |        | 313,513,669                     |       |
| Investment in and advances to joint venture                                                                                                             |       | 600,868                      |        | 292,593                         |       |
| Investment in and advances to tenants in common                                                                                                         |       | 1,710,670                    |        | 2,123,137                       |       |
| Other assets                                                                                                                                            |       | 8,825,795                    |        | 8,624,606                       |       |
|                                                                                                                                                    |       |                         |        |                            |       |
| **Total assets**                                                                                                                                        |       | $                            | 325,604,891 |                            | $          | 328,565,643 |   |
|                                                                                                                                                    |       |                         |        |                            |       |
| **LIABILITIES:**                                                                                                                                        |       |                         |        |                            |       |
| Mortgages and notes payable                                                                                                                             |       | $                            | 268,910,355 |                            | $          | 267,870,876 |   |
| Accounts payable and accrued expenses                                                                                                                   |       | 2,681,329                    |        | 2,718,912                       |       |
| Accounts payable and accrued expenses due to   affiliate                                                                                                |       | 368,321                      |        | 300,812                         |       |
| Distributions payable                                                                                                                                   |       | 569,038                      |        | 569,038                         |       |
| Security deposits                                                                                                                                       |       | 953,919                      |        | 911,816                         |       |
| Other liabilities                                                                                                                                       |       | 4,024,205                    |        | 4,026,749                       |       |
|                                                                                                                                                    |       |                         |        |                            |       |
| **Total liabilities**                                                                                                                                   |       | 277,507,167                  |        | 276,398,203                     |       |
|                                                                                                                                                    |       |                         |        |                            |       |
| COMMITMENTS AND CONTINGENCIES (NOTE 13)                                                                                                                 |       |                         |        |                            |       |
|                                                                                                                                                    |       |                         |        |                            |       |
| **EQUITY:**                                                                                                                                             |       |                         |        |                            |       |
| Partners’ equity                                                                                                                                   |       | 44,000,119                   |        | 47,961,173                      |       |
| Noncontrolling interests                                                                                                                                |       | 4,097,605                    |        | 4,206,267                       |       |
|                                                                                                                                                    |       |                         |        |                            |       |
| **Total equity**                                                                                                                                        |       | 48,097,724                   |        | 52,167,440                      |       |
|                                                                                                                                                    |       |                         |        |                            |       |
| **Total liabilities and equity**                                                                                                                        |       | $                            | 325,604,891 |                            | $          | 328,565,643 |   |

 

**NTS REALTY HOLDINGS LIMITED PARTNERSHIP**

Condensed Consolidated Statement of Equity as of March 31, 2011

(Unaudited)

 
| ** **                                            | ** ** | **(Unaudited)**                   | ** ** |
|-------------------------------------------------------|------------|-----------------------------------|------------|
| ** **                                            | ** ** | **General   Partner   Interests** | ** ** | **Limited   Partners’   Interests** | ** ** | **General   Partner** | ** ** | **Limited   Partners** | ** ** | **Noncontrolling   Interests** | ** ** | **Total** | ** ** |
| **EQUITY:**                                           |       |                              |       |   |   |   |   |   |   |   |   |   |   |
| Initial   equity                                      |       | 714,491                           |       | 10,667,117 |   | $ | 3,131,381 |   | $ | 46,750,444 |   | $ | 5,588,426 |   | $ | 55,470,251 |   |
| Net   income (loss) prior years                       |       | —                            |       | — |   | 1,386,869 |   | 20,706,731 |   | (1,431,159 | ) | 20,662,441 |   |
| Consolidated   net loss current year                  |       | —                            |       | — |   | (212,953 | ) | (3,179,063 | ) | (108,662 | ) | (3,500,678 | ) |
| Cash   distributions declared to date                 |       | —                            |       | — |   | (1,543,301 | ) | (23,039,989 | ) | (98,000 | ) | (24,681,290 | ) |
| Noncontrolling   interests, net                       |       | —                            |       | — |   | — |   | — |   | 147,000 |   | 147,000 |   |
| Retirement   of limited partnership interests to date |       | —                            |       | (848 | ) | — |   | — |   | — |   | — |   |
|                                                  |       |                              |       |   |   |   |   |   |   |   |   |   |   |
| Balances   on March 31, 2011                     |       | 714,491                           |       | 10,666,269 |   | $ | 2,761,996 |   | $ | 41,238,123 |   | $ | 4,097,605 |   | $ | 48,097,724 |   |

 

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

 

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**NTS REALTY HOLDINGS LIMITED PARTNERSHIP**

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2011 and 2010

(Unaudited)

 
| ** **                                                                        | ** ** | **(Unaudited)**                                   | ** ** |
|-----------------------------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                                        | ** ** | **Three Months Ended   March 31,** | ** ** |
| ** **                                                                        | ** ** | **2011**                                          | ** ** | **2010** | ** ** |
| **REVENUE:**                                                                      |       |                                              | ** ** |   | ** ** |
| Rental income                                                                     |       | $                                                 | 12,808,580 |   | $ | 11,187,801 |   |
| Tenant reimbursements                                                             |       | 440,027                                           |       | 444,839 |   |
|                                                                              |       |                                              |       |   |   |
| **Total revenue**                                                                 |       | 13,248,607                                        |       | 11,632,640 |   |
|                                                                              |       |                                              |       |   |   |
| **EXPENSES:**                                                                     |       |                                              |       |   |   |
| Operating expenses                                                                |       | 3,554,839                                         |       | 2,875,379 |   |
| Operating expenses reimbursed to affiliate                                        |       | 1,430,264                                         |       | 1,304,145 |   |
| Management fees                                                                   |       | 664,981                                           |       | 568,758 |   |
| Property taxes and insurance                                                      |       | 1,850,872                                         |       | 1,480,184 |   |
| Professional and administrative expenses                                          |       | 252,567                                           |       | 260,707 |   |
| Professional and administrative expenses   reimbursed to affiliate                |       | 426,744                                           |       | 419,790 |   |
| Depreciation and amortization                                                     |       | 4,785,850                                         |       | 4,541,741 |   |
|                                                                              |       |                                              |       |   |   |
| **Total operating expenses**                                                      |       | 12,966,117                                        |       | 11,450,704 |   |
|                                                                              |       |                                              |       |   |   |
| **OPERATING INCOME**                                                              |       | 282,490                                           |       | 181,936 |   |
|                                                                              |       |                                              |       |   |   |
| Interest and other income                                                         |       | 195,100                                           |       | 26,327 |   |
| Interest expense                                                                  |       | (3,534,280                                        | )          | (3,250,890 | ) |
| Loss on disposal of assets                                                        |       | (31,096                                           | )          | (3,772 | ) |
| Loss from investment in joint venture                                             |       | (425                                              | )          | — |   |
| Loss from investment in tenants in common                                         |       | (412,467                                          | )          | (438,800 | ) |
|                                                                              |       |                                              |       |   |   |
| **LOSS FROM CONTINUING OPERATIONS**                                               |       | (3,500,678                                        | )          | (3,485,199 | ) |
| Discontinued operations, net                                                      |       | —                                            |       | 74,604 |   |
| Gain on sale of discontinued operations                                           |       | —                                            |       | 534,883 |   |
|                                                                              |       |                                              |       |   |   |
| **CONSOLIDATED NET LOSS**                                                         |       | (3,500,678                                        | )          | (2,875,712 | ) |
| Net loss attributable to noncontrolling interests                                 |       | (108,662                                          | )          | (307,388 | ) |
|                                                                              |       |                                              |       |   |   |
| **NET LOSS**                                                                      |       | $                                                 | (3,392,016 | ) | $ | (2,568,324 | ) |
|                                                                              |       |                                              |       |   |   |
| **Loss from continuing operations   allocated to limited partners**               |       | $                                                 | (3,280,903 | ) | $ | (3,266,396 | ) |
| Discontinued operations, net allocated to limited   partners                      |       | —                                            |       | 69,920 |   |
| Gain on sale of discontinued operations allocated   to limited partners           |       | —                                            |       | 501,303 |   |
| Net loss attributable to noncontrolling interests   allocated to limited partners |       | (101,840                                          | )          | (288,090 | ) |
|                                                                              |       |                                              |       |   |   |
| **NET LOSS ALLOCATED TO LIMITED   PARTNERS**                                      |       | $                                                 | (3,179,063 | ) | $ | (2,407,083 | ) |
|                                                                              |       |                                              |       |   |   |
| **Loss from continuing operations   per limited partnership unit**                |       | $                                                 | (0.31      | ) | $ | (0.31 | ) |
| Discontinued operations, net per limited   partnership unit                       |       | —                                            |       | — |   |
| Gain on sale of discontinued operations per   limited partnership unit            |       | —                                            |       | 0.05 |   |
| Net loss attributable to noncontrolling interests   per limited partnership unit  |       | (0.01                                             | )          | (0.03 | ) |
|                                                                              |       |                                              |       |   |   |
| **NET LOSS PER LIMITED   PARTNERSHIP UNIT**                                       |       | $                                                 | (0.30      | ) | $ | (0.23 | ) |
|                                                                              |       |                                              |       |   |   |
| **Weighted average number of   limited partnership interests**                    |       | 10,666,269                                        |       | 10,666,269 |   |

 

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

 

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**NTS REALTY HOLDINGS LIMITED PARTNERSHIP**

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2010

(Unaudited)

 
| ** **                                                                                               | ** ** | **(Unaudited)** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|-----------------|------------|
| ** **                                                                                               | ** ** | **2011**        | ** ** | **2010** | ** ** |
| ** **                                                                                               | ** ** | ** **      | ** ** | ** ** | ** ** |
| **OPERATING ACTIVITIES:**                                                                                | ** ** | ** **      | ** ** | ** ** | ** ** |
| **Consolidated net loss**                                                                                |       | $               | (3,500,678 | ) | $ | (2,875,712 | ) |
| Adjustments to reconcile consolidated net loss to   net cash provided by (used in) operating activities: |       |            |       |   |   |
| Gain on sale of discontinued operations                                                                  |       | —          |       | (534,883 | ) |
| Loss on disposal of assets                                                                               |       | 31,096          |       | 3,772 |   |
| Depreciation and amortization                                                                            |       | 5,104,247       |       | 4,740,332 |   |
| Loss from investment in tenants in common                                                                |       | 412,467         |       | 438,800 |   |
| **Changes in assets and   liabilities:**                                                                 |       |            |       |   |   |
| Cash and equivalents — restricted                                                                   |       | 15,532          |       | (4,391,567 | ) |
| Accounts receivable                                                                                      |       | 87,198          |       | 66,261 |   |
| Other assets                                                                                             |       | (576,458        | )          | 119,541 |   |
| Accounts payable and accrued expenses                                                                    |       | (37,583         | )          | (428,273 | ) |
| Accounts payable and accrued expenses due to   affiliate                                                 |       | 67,509          |       | 92,248 |   |
| Security deposits                                                                                        |       | 42,103          |       | 5,220 |   |
| Other liabilities                                                                                        |       | (2,544          | )          | 412,625 |   |
|                                                                                                     |       |            |       |   |   |
| **Net cash provided by (used in)   operating activities**                                                |       | 1,642,889       |       | (2,351,636 | ) |
|                                                                                                     |       |            |       |   |   |
| **INVESTING ACTIVITIES:**                                                                                |       |            |       |   |   |
| Additions to land, buildings and amenities                                                               |       | (1,268,134      | )          | (969,352 | ) |
| Proceeds from sale of discontinued operations                                                            |       | —          |       | 3,835,750 |   |
| Investment in joint venture                                                                              |       | (308,275        | )          | — |   |
|                                                                                                     |       |            |       |   |   |
| **Net cash (used in) provided by   investing activities**                                                |       | (1,576,409      | )          | 2,866,398 |   |
|                                                                                                     |       |            |       |   |   |
| **FINANCING ACTIVITIES:**                                                                                |       |            |       |   |   |
| Contributions from noncontrolling interest holders   in properties                                       |       | —          |       | 147,000 |   |
| Revolving notes payable, net                                                                             |       | 1,809,987       |       | (8,200,000 | ) |
| Principal payments on mortgages payable                                                                  |       | (770,508        | )          | (594,825 | ) |
| Additions to loan costs                                                                                  |       | (25,000         | )          | (47,007 | ) |
| Cash distributions                                                                                       |       | (569,038        | )          | (569,038 | ) |
|                                                                                                     |       |            |       |   |   |
| **Net cash provided by (used in)   financing activities**                                                |       | 445,441         |       | (9,263,870 | ) |
|                                                                                                     |       |            |       |   |   |
| **NET INCREASE (DECREASE) IN CASH   AND EQUIVALENTS**                                                    |       | 511,921         |       | (8,749,108 | ) |
|                                                                                                     |       |            |       |   |   |
| **CASH AND EQUIVALENTS, beginning   of period**                                                          |       | 180,053         |       | 11,233,735 |   |
|                                                                                                     |       |            |       |   |   |
| **CASH AND EQUIVALENTS, end of   period**                                                                |       | $               | 691,974    |   | $ | 2,484,627 |   |

 

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

 

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**NTS REALTY HOLDINGS LIMITED PARTNERSHIP**

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

The unaudited condensed consolidated financial statements included herein should be read in conjunction with NTS Realty Holdings Limited Partnership’s (“NTS Realty”) 2010 annual report on Form 10-K as filed with the Securities and Exchange Commission on March 31, 2011.  The Condensed Consolidated Balance Sheet as of December 31, 2010, has been derived from the audited consolidated financial statements of NTS Realty as of that date.  Certain information and note disclosures normally included in our annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted.  In the opinion of NTS Realty Capital, Inc., our managing general partner, all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation, have been made to the accompanying unaudited condensed consolidated financial statements for the three months ended March 31, 2011 and 2010.  The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period.  As used in this quarterly report on Form 10-Q, the terms “we,” “us” or “our,” as the context requires, may refer to NTS Realty, its wholly-owned properties, properties held by wholly-owned subsidiaries, its interests in consolidated or unconsolidated joint venture investments or interests in properties held as a tenant in common with an unaffiliated third party or its interests in its properties and joint ventures.

 

**Note 1 — Summary of Significant Accounting Policies**

 

***Organization and Distribution Policy***

 

We are in the business of developing, constructing, owning and operating multifamily properties, commercial and retail real estate.  As of March 31, 2011, we owned 23 properties, comprised of 6 commercial properties, 15 multifamily properties and 2 retail properties.  The properties are located in and around Louisville (6) and Lexington (1), Kentucky; Fort Lauderdale (3) and Orlando (3), Florida; Indianapolis (4), Indiana; Memphis (1) and Nashville (2), Tennessee; Richmond (2), Virginia; and Atlanta (1), Georgia.  Our commercial properties aggregate approximately 607,000 square feet.  We own multifamily properties containing 4,391 rental units and retail properties containing approximately 47,000 square feet.

 

We pay distributions if and when authorized by our managing general partner using proceeds from advances drawn on our revolving note payable to a bank.  We are required to pay distributions on a quarterly basis, no less than sixty-five percent (65%) of our “net cash flow from operations” as this term is defined in regulations promulgated by the Treasury Department under the Internal Revenue Code of 1986, as amended; provided that if a law is enacted or existing law is modified or interpreted in a manner that subjects us to taxation as a corporation or otherwise subjects us to entity level taxation for federal, state or local income tax purposes, we will adjust the amount distributed to reflect our obligation to pay tax.  Any distribution other than a distribution with respect to the final quarter of a calendar year 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.  We 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 a quarterly distribution of $0.05 per unit to limited partners on April 15, 2011.

 

***Basis of Presentation***

 

The unaudited condensed consolidated financial statements include the accounts of all wholly-owned properties and properties that are less than wholly-owned, but which we control or for which we are the primary

 

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beneficiary.  We consolidate a variable interest entity, or VIE, when we are determined to be the primary beneficiary based on the qualitative factors affecting:

 

·                  Our power to direct the activities of a variable interest entity that most significantly affect the variable interest entity’s economic performance; and

 

·                  Our obligation to absorb losses of the variable interest entity that could potentially be significant to the variable interest entity or the right to receive benefits from the variable interest entity that could potentially be significant to the variable interest entity.

 

Our determination of the primary beneficiary of a VIE considers all relationships between us and the VIE, including management agreements and other contractual arrangements, when determining the party with the controlling financial interest, as defined, by accounting standards.  Effective January 1, 2010, we adopted the provisions of Accounting Standards Update No. 2009-17, *Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities* (“ASU 2009-17”) which amends the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, *Consolidation* (“FASB ASC Topic 810”).  The amendment to FASB ASC Topic 810 revises the consolidation guidance for variable interest entities (VIE’s) focusing on a qualitative evaluation of the conditions subjecting the entity to consolidation.  There have been no changes during 2011 in conclusions about whether an entity qualifies as a VIE or whether we are the primary beneficiary of any previously identified VIE.  During the three months ended March 31, 2011, we did not provide financial or other support to a previously identified VIE that we were not previously contractually obligated to provide.  Our unconsolidated joint venture and our properties owned as a tenant in common with an unaffiliated third party are accounted for under the equity method.  Intercompany transactions and balances have been eliminated.

 

***Fair Value of Financial Instruments***

 

FASB ASC Topic 820 *Fair Value Measurements and Disclosures* requires companies to determine fair value based on the price that would be received to sell the asset or paid to transfer the liability to a market participant.  FASB ASC Topic 820 emphasizes that fair value is a market-based measurement, not an entity specific measurement.

 

FASB ASC Topic 820 requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories:

 

·                  Level 1:  Quoted market prices in active markets for identical assets or liabilities.

 

·                  Level 2:  Observable market based inputs or unobservable inputs that are corroborated by market data.

 

·                  Level 3:  Unobservable inputs that are not corroborated by market data.

 

We did not have any material financial assets or liabilities that are required to be recorded at fair value as of March 31, 2011 or December 31, 2010.

 

***Financial Instruments***

 

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

 

FASB ASC Topic 825 *Financial Instruments* requires disclosures about fair value of financial instruments in both interim and annual financial statements.

 

Certain of our assets and liabilities are considered financial instruments.  Fair value estimates, methods and assumptions are set forth below.

 

Deferred Compensation Plans — Our Officer and Director Plans as of March 31, 2011 and as of December 31, 2010 reflected liabilities of approximately $0.3 million, the fair market value of 83,055 and 78,613 units

 

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respectively, and included in our other liabilities using level 1 measurement. Compensation expense for the Officer and Director Plans for the three months ended March 31 2011, and 2010 of  ($7,000) and $52,000 respectively.

 

Cash and equivalents and cash and equivalents — restricted — The carrying amount of these assets and liabilities approximates fair value as of March 31, 2011 and December 31, 2010, due to the short-term nature of such accounts.

 

Notes receivable — As of March 31, 2011 and December 31, 2010, we determined the estimated fair values of our notes receivable were approximately $4.4 million and $4.4 million, respectively, by discounting expected  future cash receipts utilizing a discount rate equivalent to the rate at which similar notes receivable would be originated at the reporting date. These are classified as other assets on our condensed consolidated balance sheets at March 31, 2011 and December 31, 2010.

 

Mortgages and notes payable — As of March 31, 2011 and December 31, 2010, we determined the estimated fair values of our mortgages and notes payable, were approximately $270.0 million and $274.3 million, respectively, by discounting expected future cash payments utilizing a discount rate equivalent to the rate at which similar instruments would be originated at the reporting date.

 

***Recent Accounting Pronouncements***

 

In January 2010, the FASB issued Accounting Standards Update No. 2010-06 *Improving Disclosures About Fair Value Measurements* (“ASU 2010-06”), which provides amendments to FASB ASC Subtopic 820-10 *Fair Value Measurements and Disclosures — Overall*.  ASU 2010-06 requires additional disclosures and clarifications of existing disclosures for recurring and nonrecurring fair value measurements.  The revised guidance is effective for interim and annual reporting periods beginning after December 15, 2009.  ASU 2010-06 concerns disclosure only and will not have a material impact on the Company’s financial position or results of operations.

 

**Note 2 — Use of Estimates and Reclassifications in the Preparation of Financial Statements**

 

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

 

**Note 3 — Real Estate Transactions**

 

***Acquisitions***

 

FASB ASC Topic 805 *Business Combinations*requires the acquiring entity in a business combination to measure the assets acquired, liabilities assumed (including contingencies) and any noncontrolling interests at their fair values on the acquisition date.  The statement also requires that acquisition-related transaction costs be expensed as incurred and acquired research and development value be capitalized.  In addition, acquisition-related restructuring costs are to be capitalized.  The provisions of FASB ASC Topic 805 were effective for acquisitions starting January 1, 2009.

 

Upon acquisition of wholly-owned properties or joint venture investments that are less than wholly-owned, but which we control or for which we are the primary beneficiary, the assets and liabilities purchased are recorded at their fair market value at the date of the acquisition using the acquisition method in accordance with FASB ASC Topic 805 *Business Combinations*.  We recognize the net tangible and identified intangible assets for each of the properties acquired based on fair values (including land, buildings, tenant improvements, acquired above and below market leases and the origination cost of acquired in-place leases) and acquired liabilities.  The intangible assets recorded are amortized over the weighted average lease lives.  We identify any above or below market leases or customer relationship intangibles that exist at the acquisition date.  We recognize mortgages and other liabilities at fair market value at the date of the acquisition.  We utilize an independent appraiser to assess fair value based on estimated cash flow projections for the tangible assets acquired that utilize discount and capitalization rates deemed appropriate and available market information.  We expense acquisition costs as incurred.

 

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FASB ASC Topic 360 *Property, Plant, and Equipment*specifies circumstances in which certain long-lived assets must be reviewed for impairment.  If the carrying amount of an asset exceeds the sum of its expected future cash flows, the asset’s carrying value must be written down to fair value.  In determining the value of an investment property and whether the investment property is impaired, management considers several factors such as projected rental and vacancy rates, property operating expenses, capital expenditures and interest rates.  The capitalization rate used to determine property valuation is based on the market in which the investment property is located, length of leases, tenant financial strength, the economy in general, demographics, environment, property location, visibility, age and physical condition among others.  All of these factors are considered by management in determining the value of any particular investment property.  The value of any particular investment property is sensitive to the actual results of any of these factors, either individually or taken as a whole.  If the actual results differ from management’s judgment, the valuation could be negatively or positively affected.  Application of this standard for the three months ended March 31, 2011 and 2010, did not result in an impairment loss.

 

We expense acquisition costs as incurred.  During the three months ended March 31, 2011, we did not acquire any properties.

 

***Dispositions***

 

During the three months ended March 31, 2011, we did not dispose of any properties.

 

During the three months ended March 31, 2010, we made the following property dispositions:

 
| **Wholly-Owned Properties-Retail** | ** ** | **Square Feet** | ** ** | **Our Ownership** | ** ** | **Date of Sale** | ** ** |
|-----------------------------------------|------------|----------------------|------------|------------------------|------------|----------------------------|------------|
| Outlet Mall (1)                         |       | 162,600              |       | 100                    | %          | March, 2010                |       |

 

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(1)          Gain of approximately $0.5 million.

 

***Discontinued Operations and Long-Lived Assets and Liabilities Held for Sale***

 

We have presented separately as discontinued operations in all periods the results of operations for the following properties:

 
| **Property **    | ** ** | **Location**   | ** ** | **Date of Sale** | ** ** |
|-----------------------|------------|----------------|------------|----------------------------|------------|
| Outlet Mall           |       | Louisville, KY |       | March, 2010                |       |
| Sears Office Building |       | Louisville, KY |       | June, 2010                 |       |

 

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The components of discontinued operations are outlined below and include the results of operations for the period in which we owned such assets during the three months ended March 31, 2011 and 2010.

 
| ** **                                                          | ** ** | **(Unaudited)   Three Months Ended March 31** | ** ** |
|---------------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                                                          | ** ** | **2011**                                                          | ** ** | **2010** | ** ** |
| **REVENUE:**                                                        |       |                                                              |       |   |   |
| Rental income                                                       |       | $                                                                 | —     |   | $ | 145,568 |   |
|                                                                |       |                                                              |       |   |   |
| **Total revenue**                                                   |       | —                                                            |       | 145,568 |   |
|                                                                |       |                                                              |       |   |   |
| **EXPENSES:**                                                       |       |                                                              |       |   |   |
| Operating expenses and operating expenses   reimbursed to affiliate |       | —                                                            |       | 50,117 |   |
| Management fees                                                     |       | —                                                            |       | 4,229 |   |
| Property taxes and insurance                                        |       | —                                                            |       | 16,481 |   |
|                                                                |       |                                                              |       |   |   |
| **Total operating expenses**                                        |       | —                                                            |       | 70,827 |   |
|                                                                |       |                                                              |       |   |   |
| **DISCONTINUED OPERATING INCOME**                                   |       | —                                                            |       | 74,741 |   |
|                                                                |       |                                                              |       |   |   |
| Interest expense                                                    |       | —                                                            |       | (137 | ) |
|                                                                |       |                                                              |       |   |   |
| **DISCONTINUED OPERATIONS, NET**                                    |       | $                                                                 | —     |   | $ | 74,604 |   |

 

**Note 4 — Concentration of Credit Risk**

 

We own and operate wholly, as a tenant in common with an unaffiliated third party or through joint venture investments with an unaffiliated third party, commercial, multifamily and retail properties in Louisville and Lexington, Kentucky; Fort Lauderdale and Orlando, Florida; Indianapolis, Indiana; Memphis and Nashville, Tennessee; Richmond, Virginia and Atlanta, Georgia.

 

Our financial instruments that are exposed to concentrations of credit risk consist of cash and equivalents and cash and equivalents - restricted.  We maintain our cash accounts primarily with banks located in Kentucky.

 

**Note 5 — Cash and Equivalents**

 

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

 

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

 

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

 

**Note 7 — Property and Depreciation**

 

Land, buildings and amenities are stated at cost.  Costs directly associated with the acquisition, development and construction of a project are capitalized.  Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which are generally 5-30 years for land improvements, 7-30 years for buildings and improvements and 5-30 years for amenities.  Tenant improvements are generally depreciated over the life of the initial or renewal term of the respective tenant lease.  Depreciation expense from continuing operations for the three months ended March 31, 2011 and 2010 was approximately $4.7 million and $4.4 million, respectively.

 

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**Note 8 — Investment in and Advances to Joint Venture**

 

On October 28, 2010, we entered into a joint venture investment agreement with an unaffiliated third party to invest in a commercial office building totaling approximately 125,000 square feet. The building is being developed by our affiliate, NTS Development Company, with construction expected to be completed in late 2011 or early 2012 on land leased under a 65-year ground lease.  The building will be managed by an affiliate of NTS Development Company.  We are obligated to contribute $4.9 million, for a 49% ownership interest.  The joint venture has entered into a $10.5 million construction financing agreement with a bank. We are a guarantor under this agreement and are proportionately liable for this obligation, limited to our 49% ownership interest.  There was no balance drawn on this obligation by this joint venture at December 31, 2010.  The balance drawn on the obligation at March 31, 2011 was $0.5 million.  The joint venture expects to invest a total of $20.5 million in the construction of the building and completion of tenant space.

 

This joint venture, Campus One, LLC, is a variable interest entity. We are not the primary beneficiary.  NTS Corporation through its subsidiaries, NTS Development Company and NTS Management Company, bears the right to receive significant benefit through its agreement as developer and manager, respectively.  NTS Development Company is responsible for the development of the building on time and within budget.  The development fee for these services is 2% of the projected costs, not exceeding $400,000.  NTS Management Company is responsible for leasing and managing the building and is entitled to earn leasing commissions, management fees, construction management fees, asset management fees and a disposition fee for its services.  Our interest in this variable interest entity is accounted for using the equity method and is reflected as investment in and advances to joint venture on our consolidated balance sheet on March 31, 2011 and December 31, 2010, at $0.6 million and $0.3 million, respectively.

 

**Note 9 — Investment in and Advances to Tenants in Common**

 

We own a tenant in common interest in and operate the following properties:

 

·                  The Overlook at St. Thomas Apartments: 484-unit luxury apartment complex in Louisville, Kentucky.  We own a 60% interest as a tenant in common with an unaffiliated third party.

 

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

 

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

 
| ** **                              | ** ** | **(Unaudited)**              | ** ** | ** **                      | ** ** |
|-----------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                              | ** ** | **March 31, 2011** | ** ** | **December 31, 2010** | ** ** |
| **Summarized Balance Sheets**           | ** ** | ** **                   |       |                            |       |
| Land, buildings and amenities           |       | $                            | 60,609,395 |                            | $          | 61,795,806 |   |
| Other, net                              |       | 1,731,459                    |       | 1,423,277                       |       |
| Total assets                            |       | $                            | 62,340,854 |                            | $          | 63,219,083 |   |
|                                    |       |                         |       |                            |       |
| Mortgages payable and other liabilities |       | $                            | 57,251,404 |                            | $          | 57,372,320 |   |
| Equity                                  |       | 5,089,450                    |       | 5,846,763                       |       |
| Total liabilities and equity            |       | $                            | 62,340,854 |                            | $          | 63,219,083 |   |

 
| ** **                                | ** ** | **(Unaudited)   Three Months Ended March 31** | ** ** |
|-------------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                                | ** ** | **2011**                                                          | ** ** | **2010** | ** ** |
| **Summarized Statements of   Operations** |       |                                                              |       |   |   |
| Revenue                                   |       | $                                                                 | 2,201,833  |   | $ | 2,154,414 |   |
|                                      |       |                                                              |       |   |   |
| Operating income                          |       | $                                                                 | 77,552     |   | $ | 51,129 |   |
|                                      |       |                                                              |       |   |   |
| Net loss                                  |       | $                                                                 | (757,313   | ) | $ | (793,898 | ) |

 

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**Note 10 — Mortgages and Notes Payable**

 

Mortgages and notes payable consist of the following:

 
| ** **                                                                                                                                                                                                                                                                                                                                                            | ** ** | **(Unaudited)**              | ** ** | ** **                      | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                                                                                                                                                                                                                                                                                                                                                            | ** ** | **March 31, 2011** | ** ** | **December 31, 2010** | ** ** |
| Revolving note payable to a bank for $10.0   million, with interest payable in monthly installments at a variable rate   based on LIBOR plus 2.5%, currently 2.74%, due May 31, 2011                                                                                                                                                                             |       | $                            | 6,252,133  |                            | $          | 4,442,146 |   |
|                                                                                                                                                                                                                                                                                                                                                                  |       |                         |       |                            |       |
| Revolving note payable to a bank for $8.2 million,   with interest payable in monthly installments at a variable rate based on   LIBOR one month rate plus 3.50%, currently 3.76%, due June 1, 2011,   secured by certain land, buildings and amenities, with a carrying value of   $16,506,670                                                                  |       | 6,026,602                    |       | 6,026,602                       |       |
|                                                                                                                                                                                                                                                                                                                                                                  |       |                         |       |                            |       |
| Mortgage payable to a bank in monthly installments   of principal and interest, bearing interest at a variable rate based on LIBOR   one-month rate plus 3.50%, currently 3.76%, due June 1, 2011, secured by   certain land, buildings and amenities, with a carrying value of $16,506,670.   The mortgage is guaranteed by Mr. Nichols and Mr. Lavin |       | 14,901,000                   |       | 14,994,000                      |       |
|                                                                                                                                                                                                                                                                                                                                                                  |       |                         |       |                            |       |
| Mortgage payable to an insurance company in   monthly installments of principal and interest, bearing fixed interest at   8.45%, maturing November 1, 2015, secured by certain land, buildings and   amenities, with a carrying value of $1,755,920                                                                                                              |       | 1,676,314                    |       | 1,748,859                       |       |
|                                                                                                                                                                                                                                                                                                                                                                  |       |                         |       |                            |       |
| Mortgage payable to Federal Home Loan Mortgage   Corporation in monthly installments of principal and interest, bearing fixed   interest at 5.11%, maturing December 1, 2014, secured by certain land,   buildings and amenities, with a carrying value of $10,838,338                                                                                           |       | 11,122,682                   |       | 11,177,410                      |       |
|                                                                                                                                                                                                                                                                                                                                                                  |       |                         |       |                            |       |
| Mortgage payable to a bank, with interest payable   in monthly installments until October 1, 2012, bearing fixed interest at   6.03%, maturing September 1, 2018, secured by certain land, buildings   and amenities, with a carrying value of $34,051,487                                                                                                  |       | 26,328,500                   |       | 26,328,500                      |       |
|                                                                                                                                                                                                                                                                                                                                                                  |       |                         |       |                            |       |
| Mortgage payable to Federal Home Loan Mortgage   Corporation, with interest payable in monthly installments until July 1,   2011, bearing interest at a variable rate based on LIBOR one-month rate plus   3.33%, currently 3.59%, maturing July 1, 2016, secured by certain land,   buildings and amenities, with a carrying value of $18,335,600          |       | 14,625,000                   |       | 14,625,000                      |       |
|                                                                                                                                                                                                                                                                                                                                                                  |       |                         |       |                            |       |
| Mortgage payable to Federal Home Loan Mortgage   Corporation, with interest payable in monthly installments until July 1,   2011, bearing interest at a variable rate based on LIBOR one-month rate plus   3.50%, currently 3.76%, maturing July 1, 2016, secured by certain land,   buildings and amenities, with a carrying value of $11,985,023          |       | 9,600,000                    |       | 9,600,000                       |       |
|                                                                                                                                                                                                                                                                                                                                                                  |       |                         |       |                            |       |
| Mortgage payable to Federal Home Loan Mortgage   Corporation, in monthly installments of principal and interest, bearing fixed   interest at 5.40%, maturing January 1, 2020, secured by certain land,   buildings and amenities, with a carrying value of $19,689,823                                                                                           |       | 13,680,134                   |       | 13,729,051                      |       |
|                                                                                                                                                                                                                                                                                                                                                                  |       |                         |       |                            |       |
| Mortgage payable to Federal Home Loan Mortgage   Corporation, in monthly installments of principal and interest, bearing fixed   interest at 5.40%, maturing January 1, 2020, secured by certain land,   buildings and amenities, with a carrying value of $34,846,853                                                                                           |       | 26,582,484                   |       | 26,677,537                      |       |
|                                                                                                                                                                                                                                                                                                                                                                  |       |                         |       |                            |       |
| Mortgage payable to Federal Home Loan Mortgage   Corporation, in monthly installments of principal and interest, bearing fixed   interest at 5.40%, maturing January 1, 2020, secured by certain land,   buildings and amenities, with a carrying value of $19,338,886                                                                                           |       | 16,584,516                   |       | 16,643,819                      |       |
|                                                                                                                                                                                                                                                                                                                                                                  |       |                         |       |                            |       |
| Mortgage payable to Federal Home Loan Mortgage   Corporation, in monthly installments of principal and interest, bearing fixed   interest at 5.40%, maturing January 1, 2020, secured by certain land,   buildings and amenities, with a carrying value of $33,706,840                                                                                           |       | 27,247,046                   |       | 27,344,476                      |       |
|                                                                                                                                                                                                                                                                                                                                                                  |       |                         |       |                            |       |
| Mortgage payable to Federal Home Loan Mortgage   Corporation, in monthly installments of principal and interest, bearing fixed   interest at 5.40%, maturing January 1, 2020, secured by certain land,   buildings and amenities, with a carrying value of $16,814,549                                                                                           |       | 11,213,870                   |       | 11,253,969                      |       |
|                                                                                                                                                                                                                                                                                                                                                                       |            |                              |            |                                 |            |  |  |

 

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| ** **                                                                                                                                                                                                                                                                               | ** ** | **(Unaudited)**              | ** **  | ** **                      | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|-------------|---------------------------------|------------|
| ** **                                                                                                                                                                                                                                                                               | ** ** | **March 31, 2011** | ** **  | **December 31, 2010** | ** ** |
|                                                                                                                                                                                                                                                                                     |       |                         |        |                            |       |
| Mortgage payable to Federal Home Loan Mortgage   Corporation, in monthly installments of principal and interest, bearing fixed   interest at 5.40%, maturing January 1, 2020, secured by certain land,   buildings and amenities, with a carrying value of $21,781,920              |       | 30,151,430                   |        | 30,259,244                      |       |
|                                                                                                                                                                                                                                                                                     |       |                         |        |                            |       |
| Mortgage payable to Federal Home Loan Mortgage   Corporation, in monthly installments of principal and interest, bearing fixed   interest at 5.40%, maturing January 1, 2020, secured by certain land,   buildings and amenities, with a carrying value of $9,420,103               |       | 10,775,751                   |        | 10,814,283                      |       |
|                                                                                                                                                                                                                                                                                     |       |                         |        |                            |       |
| Mortgage payable to Federal Home Loan Mortgage   Corporation, in monthly installments of principal and interest, bearing fixed   interest at 5.40%, maturing January 1, 2020, secured by certain land,   buildings and amenities, with a carrying value of $12,510,039              |       | 17,642,893                   |        | 17,705,980                      |       |
|                                                                                                                                                                                                                                                                                     |       |                         |        |                            |       |
| Mortgage payable to a bank in monthly installments   of interest, bearing interest at a variable rate based on LIBOR one-month   rate plus 3.00%, currently 3.26%, maturing April 1, 2011, secured by   certain land, buildings and amenities, with a carrying value of $36,383,663 |       | 24,500,000                   |        | 24,500,000                      |       |
|                                                                                                                                                                                                                                                                                     |       |                         |        |                            |       |
| **Total mortgages and notes   payable**                                                                                                                                                                                                                                                  |       | $                            | 268,910,355 |                            | $          | 267,870,876 |   |
|                                                                                                                                                                                                                                                                                          |            |                              |             |                                 |            |  |  |

 

On April 20, 2011 we refinanced our acquisition of Lakes Edge Apartments with a new mortgage payable to a life insurance company for $24.7 million bearing fixed interest at 5.09% and maturing May 1, 2018.  We repaid the mortgage payable to a bank for $24.5 million which matured on April 1, 2011.

 

Both the $14.9 million mortgage and the $8.2 million revolving note payable are secured by our Lakeshore Business Center properties. We have a waiver of the debt service coverage ratio requirement for these obligations from the bank which precludes us from drawing on the available funds through maturity on June 1, 2011.

 

Our $10.0 million revolving note payable to a bank is due May 31, 2011.  As of March 31, 2011, our availability to draw on this revolving note payable was approximately $3.7 million.

 

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 March 31, 2011 was approximately $270.0 million.

 

Interest paid for the three months ended March 31, 2011 and 2010 was approximately $3.3 million and $2.4 million, respectively.

 

Our mortgages may be prepaid but are generally subject to a yield-maintenance premium.  Certain mortgages and notes payable contain covenants and requirements that we maintain specified debt limits and ratios related to our debt balances and property values.  We complied with all covenants and requirements at March 31, 2011.  We anticipate renewing or refinancing our mortgages and notes payable coming due within the next twelve months.

 

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

 
| ** **                                                                                                                                                                                                                                                    | ** ** | **(Unaudited)**              | ** **  | ** **                      | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|-------------|---------------------------------|------------|
| ** **                                                                                                                                                                                                                                                    | ** ** | **March 31, 2011** | ** **  | **December 31, 2010** | ** ** |
| Mortgage payable to a bank in monthly installments   of principal and interest, bearing fixed interest at 5.72%, maturing on   April 11, 2017, secured by certain land, buildings and amenities, with a   carrying value of $35,185,864 (1)              |       | $                            | 34,140, 576 |                            | $          | 34,279,148 |   |
|                                                                                                                                                                                                                                                          |       |                         |        |                            |       |
| Mortgage payable to an insurance company in   monthly installments of principal and interest bearing fixed interest at   5.99%, maturing November 15, 2017, secured by certain land, buildings   and amenities, with a carrying value of $25,423,532 (2) |       | $                            | 22,373,029  |                            | $          | 22,446,017 |   |

 

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(1) We are proportionately liable for this mortgage, limited to our 60% interest as a tenant in common.

(2) We are jointly and severally liable under this mortgage.

 

**Note 11 — Accounts Payable and Accrued Expenses Due to Affiliate**

 

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

 

**Note 12 — Related Party Transactions**

 

Pursuant to various management agreements, NTS Development receives fees for a variety of services performed for our benefit.  NTS Development  also receives fees under separate management agreements for each of our consolidated joint venture properties and unconsolidated joint venture properties owned as a tenant in common with an unaffiliated third party and properties owned by our eight wholly-owned subsidiaries financed through Federal Home Loan Mortgage Corporation (“FHLMC”).  Property management fees are paid in an amount equal to 5% of the gross collected revenue from our properties.  This includes our wholly-owned properties, consolidated joint venture properties and properties owned by our eight wholly-owned subsidiaries financed through FHLMC.  Fees are paid in an amount equal to 3.5% of the gross collected revenue from our unconsolidated properties owned as a tenant in common with an unaffiliated third party.  We were the beneficiary of a preferential ownership interest, disproportionately greater than our initial cash investment in each property owned as a tenant in common with an unaffiliated third party.  Construction supervision fees are paid in an amount equal to 5% of the costs incurred which relate to capital improvements and significant repairs.  NTS Development receives commercial leasing fees equal to 4% of the gross rental amount for new leases and 2% of the gross rental amount for new leases in which a broker is used and for renewals or extensions.  Disposition fees are paid to NTS Development in an amount of 1% to 4% of the aggregate sales price of a property pursuant to our management agreement and up to a 6% fee upon disposition on our properties owned as a tenant in common with an unaffiliated third party under separate management agreements.  NTS Development has agreed to accept a lower management fee for the properties we own as a tenant in common with an unaffiliated third party in exchange for a larger potential disposition fee.  NTS Development is reimbursed its actual costs for services rendered to NTS Realty.

 

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

 

We were charged the following approximate amounts pursuant to our various management agreements with NTS Development for the three months ended March 31, 2011 and 2010.  These charges include items which have been expensed as operating expenses reimbursed to affiliate or professional and administrative expenses reimbursed to affiliate, and items which have been capitalized as other assets or as land, buildings and amenities.  Certain of these items are included in our results of discontinued operations.

 

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| ** **                                                                     | ** ** | **(Unaudited)**                                      | ** ** |
|--------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                                     | ** ** | **Three Months Ended March 31,** | ** ** |
| ** **                                                                     | ** ** | **2011**                                             | ** ** | **2010** | ** ** |
| Property management fees                                                       | ** ** | **$**                                                | 665,000    |   | $ | 573,000 |   |
|                                                                           |       |                                                 |       |   |   |
| Operating expenses reimbursement - property                                    |       | 982,000                                              |       | 916,000 |   |
| Operating expenses reimbursement - multifamily   leasing                       |       | 175,000                                              |       | 162,000 |   |
| Operating expenses reimbursement - administrative                              |       | 262,000                                              |       | 238,000 |   |
| Operating expenses reimbursement - other                                       |       | 11,000                                               |       | 13,000 |   |
|                                                                           |       |                                                 |       |   |   |
| Total operating expenses reimbursed to affiliate                               |       | 1,430,000                                            |       | 1,329,000 |   |
|                                                                           |       |                                                 |       |   |   |
| Professional and administrative expenses   reimbursed to affiliate             |       | 427,000                                              |       | 420,000 |   |
|                                                                           |       |                                                 |       |   |   |
| Construction supervision and leasing fees                                      |       | 93,000                                               |       | 77,000 |   |
|                                                                           |       |                                                 |       |   |   |
| Disposition fees included in gain on sale of   discontinued operations         |       | —                                               |       | 160,000 |   |
|                                                                           |       |                                                 |       |   |   |
| **Total related party   transactions**                                         |       | $                                                    | 2,615,000  | ** ** | **$** | 2,559,000 | ** ** |
|                                                                           |       |                                                 |       |   |   |
| **Total related party   transactions from our investment in tenant in common** |       | $                                                    | 323,000    |   | $ | 313,000 |   |
|                                                                           |       |                                                 |       |   |   |
| **Total related party   transactions from our investment in joint venture**    |       | $                                                    | 34,000     |   | $ | — |   |

 

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

 

During the three months ended March 31, 2011 and 2010, we were charged approximately $18,000 and $14,000, respectively, for property maintenance fees from affiliates of NTS Development Company.

 

NTS Development Company leased 20,368 square feet of office space in NTS Center, at a rental rate of $14.50 per square foot and 1,902 square feet of storage space at a rental rate of $5.50 per square foot.  We recognized rents of approximately $76,000 and $77,000 from NTS Development Company for the three months ended March 31, 2011 and 2010, respectively.  The average per square foot rental rate for office space in NTS Center as of March 31, 2011 was $14.28 per square foot.

 

During the year ended December 31, 2010, we advanced $3.0 million as a note receivable to a related party.  We have classified this note receivable as other assets on our unaudited condensed consolidated balance sheets.

 

**Note 13 — Commitments and Contingencies**

 

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

 

***Litigation***

 

From time to time, we are involved in litigation and other legal proceedings arising out of the ordinary course of business.  There are no pending material legal proceedings to which we are subject.

 

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**Note 14 — Segment Reporting**

 

Our reportable operating segments include — multifamily, commercial and retail real estate operations.  The following unaudited financial information of the operating segments has been prepared using a management approach, which is consistent with the basis and manner in which our management internally disaggregates financial information for the purpose of assisting in making internal operating decisions.  We evaluate performance based on stand-alone operating segment net income (loss).  The non-segment information necessary to reconcile to our total operating results is included in the column labeled “Partnership” in the following information.

 
| ** **                                                                                                      | ** ** | **(Unaudited)**                                                | ** ** |
|-----------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------|------------|
| ** **                                                                                                      | ** ** | **Three Months Ended March 31, 2011** | ** ** |
| ** **                                                                                                      | ** ** | **Retail**                                                     | ** ** | **Commercial** | ** ** | **Multifamily** | ** ** | **Partnership** | ** ** | **Total** | ** ** |
| Rental income                                                                                                   |       | $                                                              | 141,333    |   | $ | 1,392,254 |   | $ | 11,283,896 |   | $ | (8,903 | ) | $ | 12,808,580 |   |
| Tenant reimbursements                                                                                           |       | 27,064                                                         |       | 412,963 |   | — |   | — |   | 440,027 |   |
|                                                                                                            |       |                                                           |       |   |   |   |   |   |   |   |   |
| **Total revenue**                                                                                               |       | 168,397                                                        |       | 1,805,217 |   | 11,283,896 |   | (8,903 | ) | 13,248,607 |   |
|                                                                                                            |       |                                                           |       |   |   |   |   |   |   |   |   |
| Operating expenses and operating expenses   reimbursed to affiliate                                             |       | 42,045                                                         |       | 694,379 |   | 4,248,679 |   | — |   | 4,985,103 |   |
| Management fees                                                                                                 |       | 8,527                                                          |       | 90,425 |   | 566,029 |   | — |   | 664,981 |   |
| Property taxes and insurance                                                                                    |       | 13,137                                                         |       | 245,434 |   | 1,563,127 |   | 29,174 |   | 1,850,872 |   |
| Professional and administrative expenses and   professional and administrative expenses reimbursed to affiliate |       | —                                                         |       | — |   | — |   | 679,311 |   | 679,311 |   |
| Depreciation and amortization                                                                                   |       | 41,805                                                         |       | 443,499 |   | 4,300,546 |   | — |   | 4,785,850 |   |
|                                                                                                            |       |                                                           |       |   |   |   |   |   |   |   |   |
| **Total operating expenses**                                                                                    |       | 105,514                                                        |       | 1,473,737 |   | 10,678,381 |   | 708,485 |   | 12,966,117 |   |
|                                                                                                            |       |                                                           |       |   |   |   |   |   |   |   |   |
| **Operating income (loss)**                                                                                     |       | 62,883                                                         |       | 331,480 |   | 605,515 |   | (717,388 | ) | 282,490 |   |
|                                                                                                            |       |                                                           |       |   |   |   |   |   |   |   |   |
| Interest and other income                                                                                       |       | 695                                                            |       | 369 |   | 8,717 |   | 185,319 |   | 195,100 |   |
| Interest expense                                                                                                |       | (12,376                                                        | )          | (145,483 | ) | (3,319,912 | ) | (56,509 | ) | (3,534,280 | ) |
| Loss on disposal of assets                                                                                      |       | (2,097                                                         | )          | (7,631 | ) | (21,368 | ) | — |   | (31,096 | ) |
| Loss from investment in joint venture                                                                           |       | —                                                         |       | (425 | ) | — |   | — |   | (425 | ) |
| Loss from investments in tenants in common                                                                      |       | —                                                         |       | — |   | (412,467 | ) | — |   | (412,467 | ) |
|                                                                                                            |       |                                                           |       |   |   |   |   |   |   |   |   |
| **Income (loss) from continuing****operations**                                                                 |       | 49,105                                                         |       | 178,310 |   | (3,139,515 | ) | (588,578 | ) | (3,500,678 | ) |
| Discontinued operations, net                                                                                    |       | —                                                         |       | — |   | — |   | — |   | — |   |
|                                                                                                            |       |                                                           |       |   |   |   |   |   |   |   |   |
| **Consolidated net income (loss)**                                                                              |       | 49,105                                                         |       | 178,310 |   | (3,139,515 | ) | (588,578 | ) | (3,500,678 | ) |
|                                                                                                            |       |                                                           |       |   |   |   |   |   |   |   |   |
| Net loss attributable to noncontrolling interests                                                               |       | —                                                         |       | — |   | (108,662 | ) | — |   | (108,662 | ) |
|                                                                                                            |       |                                                           |       |   |   |   |   |   |   |   |   |
| **Net income (loss)**                                                                                           |       | $                                                              | 49,105     |   | $ | 178,310 |   | $ | (3,030,853 | ) | $ | (588,578 | ) | $ | (3,392,016 | ) |
|                                                                                                            |       |                                                           |       |   |   |   |   |   |   |   |   |
| Land, buildings and amenities, net                                                                              |       | $                                                              | 3,667,298  |   | $ | 26,676,306 |   | $ | 279,703,125 |   | $ | — |   | $ | 310,046,729 |   |
|                                                                                                            |       |                                                           |       |   |   |   |   |   |   |   |   |
| Expenditures for land, buildings and amenities                                                                  |       | $                                                              | 11,587     |   | $ | 564,098 |   | $ | 692,449 |   | $ | — |   | $ | 1,268,134 |   |
|                                                                                                            |       |                                                           |       |   |   |   |   |   |   |   |   |
| Segment liabilities from continuing operations                                                                  |       | $                                                              | 44,942     |   | $ | 2,934,727 |   | $ | 245,984,732 |   | $ | 28,542,766 |   | $ | 277,507,167 |   |
|                                                                                                                 |            |                                                                |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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| ** **                                                                                                      | ** ** | **(Unaudited)**                                                | ** ** |
|-----------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------|------------|
| ** **                                                                                                      | ** ** | **Three Months Ended March 31, 2010** | ** ** |
| ** **                                                                                                      | ** ** | **Retail**                                                     | ** ** | **Commercial** | ** ** | **Multifamily** | ** ** | **Partnership** | ** ** | **Total** | ** ** |
| Rental income                                                                                                   |       | $                                                              | 157,346    |   | $ | 1,423,470 |   | $ | 9,615,888 |   | $ | (8,903 | ) | $ | 11,187,801 |   |
| Tenant reimbursements                                                                                           |       | 40,244                                                         |       | 404,595 |   | — |   | — |   | 444,839 |   |
|                                                                                                            |       |                                                           |       |   |   |   |   |   |   |   |   |
| **Total revenue**                                                                                               |       | 197,590                                                        |       | 1,828,065 |   | 9,615,888 |   | (8,903 | ) | 11,632,640 |   |
|                                                                                                            |       |                                                           |       |   |   |   |   |   |   |   |   |
| Operating expenses and operating expenses   reimbursed to affiliate                                             |       | 38,370                                                         |       | 726,944 |   | 3,414,210 |   | — |   | 4,179,524 |   |
| Management fees                                                                                                 |       | 8,592                                                          |       | 76,056 |   | 484,110 |   | — |   | 568,758 |   |
| Property taxes and insurance                                                                                    |       | 12,883                                                         |       | 264,566 |   | 1,170,895 |   | 31,840 |   | 1,480,184 |   |
| Professional and administrative expenses and   professional and administrative expenses reimbursed to affiliate |       | —                                                         |       | — |   | — |   | 680,497 |   | 680,497 |   |
| Depreciation and amortization                                                                                   |       | 41,438                                                         |       | 467,046 |   | 4,033,257 |   | — |   | 4,541,741 |   |
|                                                                                                            |       |                                                           |       |   |   |   |   |   |   |   |   |
| **Total operating expenses**                                                                                    |       | 101,283                                                        |       | 1,534,612 |   | 9,102,472 |   | 712,337 |   | 11,450,704 |   |
|                                                                                                            |       |                                                           |       |   |   |   |   |   |   |   |   |
| **Operating income (loss)**                                                                                     |       | 96,307                                                         |       | 293,453 |   | 513,416 |   | (721,240 | ) | 181,936 |   |
|                                                                                                            |       |                                                           |       |   |   |   |   |   |   |   |   |
| Interest and other income                                                                                       |       | —                                                         |       | 396 |   | 8,808 |   | 17,123 |   | 26,327 |   |
| Interest expense                                                                                                |       | (52,091                                                        | )          | (173,638 | ) | (2,936,323 | ) | (88,838 | ) | (3,250,890 | ) |
| (Loss) gain on disposal of assets                                                                               |       | —                                                         |       | (4,211 | ) | 439 |   | — |   | (3,772 | ) |
| Loss from investments in tenants in common                                                                      |       | —                                                         |       | — |   | (438,800 | ) | — |   | (438,800 | ) |
|                                                                                                            |       |                                                           |       |   |   |   |   |   |   |   |   |
| **Income (loss) from continuing****operations**                                                                 |       | 44,216                                                         |       | 116,000 |   | (2,852,460 | ) | (792,955 | ) | (3,485,199 | ) |
| Discontinued operations, net                                                                                    |       | 119,889                                                        |       | (45,285 | ) | — |   | — |   | 74,604 |   |
| Gain on sale of discontinued operations                                                                         |       | 534,883                                                        |       | — |   | — |   | — |   | 534,883 |   |
|                                                                                                            |       |                                                           |       |   |   |   |   |   |   |   |   |
| **Consolidated net income (loss)**                                                                              |       | 698,988                                                        |       | 70,715 |   | (2,852,460 | ) | (792,955 | ) | (2,875,712 | ) |
|                                                                                                            |       |                                                           |       |   |   |   |   |   |   |   |   |
| Net loss attributable to noncontrolling interests                                                               |       | —                                                         |       | — |   | (307,388 | ) | — |   | (307,388 | ) |
|                                                                                                            |       |                                                           |       |   |   |   |   |   |   |   |   |
| **Net income (loss)**                                                                                           |       | $                                                              | 698,988    |   | $ | 70,715 |   | $ | (2,545,072 | ) | $ | (792,955 | ) | $ | (2,568,324 | ) |
|                                                                                                            |       |                                                           |       |   |   |   |   |   |   |   |   |
| Land, buildings and amenities, net                                                                              |       | $                                                              | 3,812,461  |   | $ | 27,530,533 |   | $ | 256,317,872 |   | $ | — |   | $ | 287,660,866 |   |
|                                                                                                            |       |                                                           |       |   |   |   |   |   |   |   |   |
| Expenditures for land, buildings and amenities                                                                  |       | $                                                              | —     |   | $ | 33,418 |   | $ | 936,434 |   | $ | — |   | $ | 969,852 |   |
|                                                                                                            |       |                                                           |       |   |   |   |   |   |   |   |   |
| Segment liabilities from continuing operations                                                                  |       | $                                                              | 2,351,552  |   | $ | 3,026,966 |   | $ | 224,106,667 |   | $ | 16,617,653 |   | $ | 246,102,838 |   |
|                                                                                                                 |            |                                                                |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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**Note 15 — Subsequent Events**

 

On April 15, 2011, Pluris Property Fund II, L.P., our joint venture partner, contributed approximately $4.11 million to Lakes Edge Apartments which reduced our ownership percentage to 73.5% for the property.  We do not expect our ownership interest in the joint venture to be further reduced.  Pluris Property Fund II, L.P. is a related party as a member of the general partner of Pluris Property Fund II, L.P. is Mr. Lavin’s son-in-law.

 

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

 

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

 

**Critical Accounting Policies**

 

A critical accounting policy is one that would materially affect our operations or financial condition, and requires management to make estimates or judgments in certain circumstances.  These judgments often result from the need to make estimates about the effect of matters that are inherently uncertain.  Critical Accounting Policies 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.  Our Critical Accounting Policies, as previously disclosed in our most recent annual report on Form 10-K, which was filed on March 31, 2011, discuss judgments known to management pertaining to trends, events or uncertainties known which were taken into consideration upon the application of those policies and the likelihood that materially different amounts would be reported upon taking into consideration different conditions and assumptions and remain unchanged during the quarter ended March 31, 2011.

 

**Results of Operations**

 

As of March 31, 2011, we owned wholly, as a tenant in common with an unaffiliated third party or through joint venture investments with an unaffiliated third party, 6 commercial properties, 15 multifamily properties and 2 retail properties.  We generate substantially all of our operating income from property operations.

 

Net losses for the three months ended March 31, 2011 and 2010 were approximately $3.4 million and $2.6 million, respectively.  The change in net loss for the three months ended March 31, 2011 as compared to March 31, 2010 was primarily due to a $0.5 million decrease in gain on sale of discontinued operations, a $0.3 million increase in interest expense and a $0.2 million decrease in net loss attributable to noncontrolling interests, partially offset by a $0.2 million increase in interest and other income.  There were no other material offsetting changes in net loss for the three months ended March 31, 2011 and 2010.

 

The following tables include certain selected summarized operating data for the three months ended March 31, 2011 and 2010.  This data should be read in conjunction with our financial statements, including the notes attached hereto.

 
| ** **                                                          | ** ** | **(Unaudited)**                                                | ** ** |
|---------------------------------------------------------------------|------------|----------------------------------------------------------------|------------|
| ** **                                                          | ** ** | **Three Months Ended March 31, 2011** | ** ** |
| ** **                                                          | ** ** | **Retail**                                                     | ** ** | **Commercial** | ** ** | **Multifamily** | ** ** | **Partnership** | ** ** | **Total** | ** ** |
| Total revenues                                                      |       | $                                                              | 168,397    |   | $ | 1,805,217 |   | $ | 11,283,896 |   | $ | (8,903 | ) | $ | 13,248,607 |   |
| Operating expenses and operating expenses   reimbursed to affiliate |       | 42,045                                                         |       | 694,379 |   | 4,248,679 |   | — |   | 4,985,103 |   |
| Depreciation and amortization                                       |       | 41,805                                                         |       | 443,499 |   | 4,300,546 |   | — |   | 4,785,850 |   |
| Total interest expense                                              |       | (12,376                                                        | )          | (145,483 | ) | (3,319,912 | ) | (56,509 | ) | (3,534,280 | ) |
| Net income (loss)                                                   |       | 49,105                                                         |       | 178,310 |   | (3,030,853 | ) | (588,578 | ) | (3,392,016 | ) |
|                                                                     |            |                                                                |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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| ** **                                                          | ** ** | **(Unaudited)**                                                | ** ** |
|---------------------------------------------------------------------|------------|----------------------------------------------------------------|------------|
| ** **                                                          | ** ** | **Three Months Ended March 31, 2010** | ** ** |
| ** **                                                          | ** ** | **Retail**                                                     | ** ** | **Commercial** | ** ** | **Multifamily** | ** ** | **Partnership** | ** ** | **Total** | ** ** |
| Total revenues                                                      |       | $                                                              | 197,590    |   | $ | 1,828,065 |   | $ | 9,615,888 |   | $ | (8,903 | ) | $ | 11,632,640 |   |
| Operating expenses and operating expenses   reimbursed to affiliate |       | 38,370                                                         |       | 726,944 |   | 3,414,210 |   | — |   | 4,179,524 |   |
| Depreciation and amortization                                       |       | 41,438                                                         |       | 467,046 |   | 4,033,257 |   | — |   | 4,541,741 |   |
| Total interest expense                                              |       | (52,091                                                        | )          | (173,638 | ) | (2,936,323 | ) | (88,838 | ) | (3,250,890 | ) |
| Net income (loss)                                                   |       | 698,988                                                        |       | 70,715 |   | (2,545,072 | ) | (792,955 | ) | (2,568,324 | ) |
|                                                                     |            |                                                                |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

Occupancy levels at our continuing properties by segment as of March 31, 2011 and 2010 were as follows:

 
| ** **                                                   | ** ** | **2011** | ** ** | **2010** | ** ** |
|--------------------------------------------------------------|------------|----------|------------|----------|------------|
| Multifamily                                                  |       | 96       | %          | 94       | %          |
| Multifamily Unconsolidated Investment in Tenants   in Common |       | 95       | %          | 95       | %          |
| Commercial                                                   |       | 80       | %          | 78       | %          |
| Retail                                                       |       | 95       | %          | 100      | %          |

 

The average occupancy levels at our continuing properties by segment for the three months ended March 31, 2011 and 2010 were as follows:

 
| ** **                                                   | ** ** | **Three Months Ended March 31,** | ** ** |
|--------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                   | ** ** | **2011**                                             | ** ** | **2010** | ** ** |
| Multifamily                                                  |       | 96                                                   | %          | 94 | % |
| Multifamily Unconsolidated Investment in Tenants   in Common |       | 94                                                   | %          | 95 | % |
| Commercial                                                   |       | 78                                                   | %          | 77 | % |
| Retail                                                       |       | 95                                                   | %          | 100 | % |

 

We believe the changes in average and period end 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.

 

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

 

The following discussion relating to changes in our results of operations includes only material line items within our unaudited condensed consolidated statements of operations or line items for which there was a material change between the three months ended March 31, 2011 and 2010.

 

***Rental Income and Tenant Reimbursements***

 

Rental income and tenant reimbursements from continuing operations for the three months ended March 31, 2011 and 2010 were approximately $13.2 million and $11.6 million, respectively. The increase of $1.6 million, or 14%, was primarily the result of a $1.7 million increase in rental income across the multifamily segment primarily related to our acquisition of Lakes Edge Apartments (December 2010), referred to as our “2010 acquisition” as well as increased occupancy in our multifamily segment.  There were no other material offsetting changes in rental income and tenant reimbursements for the three months ended March 31, 2011 and 2010.

 

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***Operating Expenses and Operating Expenses Reimbursed to Affiliate***

 

Operating expenses from continuing operations for the three months ended March 31, 2011 and 2010 were approximately $3.6 million and $2.9 million, respectively.  The increase of $0.7 million, or 24%, was primarily the result of a $0.2 million increase in operating expenses from our 2010 acquisition and a $0.5 million increase in operating expenses across the remaining multifamily segment primarily related to increased repairs and maintenance.  There were no other material offsetting changes in operating expenses for the three months ended March 31, 2011 and 2010.

 

Operating expenses reimbursed to affiliate from continuing operations for the three months ended March 31, 2011 and 2010 were approximately $1.4 million and $1.3 million, respectively.  The increase of $0.1 million, or 8%, was primarily the result of a $0.1 million increase in operating expenses reimbursed to affiliate from our 2010 acquisition.  There were no other material offsetting changes in operating expenses reimbursed to affiliate for the three months ended March 31, 2011 and 2010.

 

We do not have any employees.  Pursuant to our various management agreements, NTS Development Company employs the individuals who provide services necessary to operate our properties and conduct our business.  NTS Development Company provides employees that may also perform services for other properties and business enterprises.  In the situation where a particular employee benefits multiple operations, the employee’s cost is proportionately charged out to the entity receiving the services.  We only reimburse charges from NTS Development Company for actual costs of employee services incurred for our benefit.  The cost of services provided to us by NTS Development Company’s employees are classified in our condensed consolidated statements of operations as operating expenses reimbursed to affiliate.  The services provided by others are classified as operating expenses.

 

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

 

Operating expenses reimbursed to affiliate from continuing operations consisted approximately of the following:

 
| ** **          | ** ** | **(Unaudited)**                                      | ** ** |
|---------------------|------------|------------------------------------------------------|------------|
| ** **          | ** ** | **Three Months Ended March 31,** | ** ** |
| ** **          | ** ** | **2011**                                             | ** ** | **2010** | ** ** |
| Property            |       | $                                                    | 982,000    |   | $ | 906,000 |   |
| Multifamily leasing |       | 175,000                                              |       | 163,000 |   |
| Administrative      |       | 262,000                                              |       | 224,000 |   |
| Other               |       | 11,000                                               |       | 11,000 |   |
|                |       |                                                 |       |   |   |
| **Total**           |       | $                                                    | 1,430,000  |   | $ | 1,304,000 |   |

 

***Management Fees***

 

Management fees from continuing operations for the three months ended March 31, 2011 and 2010 were approximately $0.7 million and $0.6 million, respectively. The increase of $0.1 million, or 17%, was primarily due to the multifamily segment pertaining to our 2010 acquisition. There were no other material offsetting changes in management fees for the three months ended March 31, 2011 and 2010.

 

Pursuant to our various management agreements, NTS Development Company and or its affiliate NTS Management Company collectively referred to as “NTS Development” receives property management fees equal to 5% of the gross collected revenue from our properties.  This includes our wholly-owned properties, our consolidated joint venture properties and properties owned by our eight wholly-owned subsidiaries financed through Federal Home Loan Mortgage Corporation, or FHLMC.  NTS Development receives property management fees from our unconsolidated joint venture properties owned as a tenant in common with an unaffiliated third party equal to 3.5% of their gross collected revenue under separate management agreements.  We were the beneficiary of a preferential ownership interest, disproportionately greater than our initial cash investment in each property owned as a tenant in common with an unaffiliated third party.  NTS Development has agreed to accept a lower management fee for the

 

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properties we own as a tenant in common with an unaffiliated third party in exchange for a larger potential disposition fee.  Disposition fees of up to 6% of the gross sales price may be paid to NTS Development for the sale of one of our properties owned as a tenant in common with an unaffiliated third party.  Management fees are calculated as a percentage of cash collections and are recorded on the accrual basis.  As a result, the fluctuations in revenue between years will differ from the fluctuations of management fee expense.

 

***Property Taxes and Insurance***

 

Property taxes and insurance from continuing operations for the three months ended March 31, 2011 and 2010 were approximately $1.9 million and $1.5 million, respectively.  The increase of $0.4 million, or 27%, was primarily the result of a $0.2 million increase in property taxes and insurance from our 2010 acquisition and a $0.2 million increase in property taxes at our Indianapolis, Indiana multifamily properties primarily related to receiving revised tax rates. There were no other material offsetting changes in property taxes and insurance for the three months ended March 31, 2011 and 2010.

 

***Professional and Administrative Expenses and Professional and Administrative Expenses Reimbursed to Affiliate***

 

Professional and administrative expenses from continuing operations for the three months ended March 31, 2011 and 2010 were approximately $0.3 million and $0.3 million, respectively.  There were no material offsetting changes in professional and administrative expenses for the three months ended March 31, 2011 and 2010.

 

Professional and administrative expenses reimbursed to affiliate from continuing operations for the three months ended March 31, 2011 and 2010 were $0.4 million and $0.4 million, respectively.  There were no material offsetting changes in professional and administrative expenses reimbursed to affiliate for the three months ended March 31, 2011 and 2010.

 

We do not have any employees.  Pursuant to our collective management agreements, NTS Development Company employs the individuals who provide services necessary to operate our properties and conduct our business.  NTS Development Company provides employees that may also perform services for other properties and business enterprises.  In the situation where a particular employee benefits multiple operations, the employee’s cost is proportionately charged out to the entity receiving the services.  We only reimburse charges from NTS Development Company for actual costs of employee services incurred for our benefit.  The cost of services provided to us by NTS Development Company’s employees are classified in our consolidated statements of operations as professional and administrative expenses reimbursed to affiliate.  The services provided by others are classified as professional and administrative expenses.

 

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

 

Professional and administrative expenses reimbursed to affiliate consisted approximately of the following:

 
| ** **         | ** ** | **(Unaudited)**                                      | ** ** |
|--------------------|------------|------------------------------------------------------|------------|
| ** **         | ** ** | **Three Months Ended March 31,** | ** ** |
| ** **         | ** ** | **2011**                                             | ** ** | **2010** | ** ** |
| Finance            |       | $                                                    | 108,000    |   | $ | 107,000 |   |
| Accounting         |       | 195,000                                              |       | 204,000 |   |
| Investor relations |       | 70,000                                               |       | 67,000 |   |
| Human resources    |       | 5,000                                                |       | 4,000 |   |
| Overhead           |       | 49,000                                               |       | 38,000 |   |
|               |       |                                                 |       |   |   |
| **Total**          |       | $                                                    | 427,000    |   | $ | 420,000 |   |

 

***Depreciation and Amortization***

 

Depreciation and amortization from continuing operations for the three months ended March 31, 2011 and 2010 was approximately $4.8 million and $4.5 million, respectively.  The increase of $0.3 million, or 7%, was primarily due to our 2010 acquisition of approximately $0.6 million offset by a decrease in depreciation of

 

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approximately $0.3 million in our multifamily segment.  There were no other material offsetting changes in depreciation and amortization for the three months ended March 31, 2011 and 2010.

 

***Interest and Other Income***

 

Interest and other income from continuing operations for the three months ended March 31, 2011 and 2010 was approximately $0.2 million and $26,000, respectively.   The increase was primarily due to increased interest income from our note receivable issued to a related party in 2010.  There were no other material offsetting changes in interest and other income for the three months ended March 31, 2011 and 2010.

 

***Interest Expense***

 

Interest expense from continuing operations for the three months ended March 31, 2011 and 2010 was approximately $3.5 million and $3.3 million, respectively.  The increase of $0.2 million, or 6%, was primarily due to $0.3 million of increased interest expense related to our additional borrowings related to our 2010 acquisition, offset by decreased interest expense of $0.1 million related to our mortgage payable to a bank, which was satisfied during 2010.  There were no other material offsetting changes in interest expense for the three months ended March 31, 2011 and 2010.

 

***Loss on Disposal of Assets***

 

The loss on disposal of assets from continuing operations for the three months ended March 31, 2011 and 2010 can be attributed to assets that were not fully depreciated at the time of replacement, spread primarily amongst the commercial and multifamily properties.  The 2011 loss on disposal of assets was due to retirement of signage, wood flooring, clubhouse carpeting, clubhouse painting, exercise equipment, and heating and air conditioning units. The 2010 loss on disposal of assets was due to the retirement of heating and air conditioning units.

 

***Loss From Investment in Tenants in Common***

 

Loss from investment in tenants in common for the three months ended March 31, 2011 and 2010 includes the net operating losses attributable to our investments in tenants in common with an unaffiliated third party.  The properties are The Overlook at St. Thomas Apartments and Creek’s Edge at Stony Point Apartments.

 

***Discontinued Operations, Net***

 

Net income from discontinued operations for the three months ended March 31, 2010 was approximately $75,000.  Discontinued operations, net for the three months ended March 31, 2010 include the operating results for the properties previously sold as listed below.

 
| **Property **    | ** ** | **Location**   | ** ** | **Date of Sale** | ** ** |
|-----------------------|------------|----------------|------------|----------------------------|------------|
| Outlet Mall           |       | Louisville, KY |       | March, 2010                |       |
| Sears Office Building |       | Louisville, KY |       | June, 2010                 |       |

 

***Gain on Sale of Discontinued Operations***

 

Gain on sale of discontinued operations for the three months ended March 31, 2010 was approximately $0.5 million due to the sale of the Outlet Mall in March 2010.

 

**Liquidity and Capital Resources**

 

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

 

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The components of the condensed consolidated statements of cash flows for the three months ended March 31, 2011 and 2010 are outlined below.

 
| ** **                                            | ** ** | **(Unaudited)**                                      | ** ** |
|-------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                            | ** ** | **Three Months Ended March 31,** | ** ** |
| ** **                                            | ** ** | **2011**                                             | ** ** | **2010** | ** ** |
| Operating activities                                  | ** ** | **$**                                                | 1,643,000  |   | $ | (2,352,000 | **)** |
| Investing activities                                  |       | (1,576,000                                           | )          | 2,867,000 |   |
| Financing activities                                  |       | 445,000                                              |       | (9,264,000 | ) |
|                                                  |       |                                                 |       |   |   |
| **Net increase (decrease) in cash   and equivalents** |       | $                                                    | 512,000    |   | $ | (8,749,000 | ) |

 

***Cash Flow from Operating Activities***

 

Net cash provided by operating activities was approximately $1.6 million for the three months ended March 31, 2011, compared to net cash used in operating activities of approximately $2.4 million for the three months ended March 31, 2010.  The change of approximately $4.0 million was primarily due to less cash used to fund lender held cash escrows of approximately $4.4 million, less cash used to satisfy accounts payable and accounts payable due to affiliate of approximately $0.4 million, increased cash provided by results of operations of approximately $0.3 million and decreased cash used by prepaid income of approximately $0.2 million.  Our cash provided is offset by increased cash used to pay property taxes of approximately $0.7 million and increased cash used to fund prepaids and refundable deposits of approximately $0.6 million.  The remaining increases and decreases in cash were individually immaterial.

 

***Cash Flow from Investing Activities***

 

Net cash used in investing activities was approximately $1.6 million for the three months ended March 31, 2011, compared to net cash provided by investing activities of approximately $2.9 million for the three months ended March 31, 2010.  The change of approximately $4.5 million was primarily due to a decrease in cash provided by sale of discontinued operations of approximately $3.8 million, increased cash used to invest in joint ventures of approximately $0.3 million and increased cash of $0.3 million used for additions to land, buildings and amenities.

 

***Cash Flow from Financing Activities***

 

Net cash provided by financing activities was approximately $0.4 million for the three months ended March 31, 2011, compared to net cash used in financing activities of approximately $9.3 million for the three months ended March 31, 2010.  The change of approximately $9.7 million was primarily due to activity on our revolving notes payable of $10.0 million, offset by an increase of $0.2 million used for principal payments on our mortgages payable and a decrease of $0.1 million provided by contributions from our noncontrolling interest holders.

 

***Future Liquidity***

 

Our future liquidity depends significantly on our properties’ occupancy remaining at a level which allows us to make debt payments and have adequate working capital, currently and in the future.  If occupancy were to fall below that level and remain at or below that level for a significant period of time, our ability to make payments due under our debt agreements and to continue paying daily operational costs would be greatly impaired.  In the next twelve months, we intend to operate the properties in a similar manner to their operation in recent years.  Cash reserves, which consist of unrestricted cash as shown on our balance sheet, were approximately $0.7 million on March 31, 2011.

 

On March 15, 2011, we announced that the board of directors of our managing general partner approved a quarterly distribution of $0.05 per unit on our limited partnership units.  The distribution was paid on April 15, 2011, to limited partners of record at the close of business on March 31, 2011.

 

Pursuant to leasing agreements signed by March 31, 2011, we are obligated to incur expenditures of approximately $0.8 million funded by borrowings on our debt during the next twelve months primarily for renovations and tenant origination costs necessary to continue leasing our properties.  This discussion of future

 

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liquidity details our material commitments.  We anticipate repaying, seeking renewal or refinancing of our revolving  notes and mortgage payable coming due in the next twelve months.

 

On April 20, 2011 we refinanced our acquisition of Lakes Edge Apartments with a new mortgage payable to a life insurance company for $24.7 million bearing fixed interest at 5.09% and maturing May 1, 2018.  We repaid the mortgage payable to a bank for $24.5 million which matured on April 1, 2011.

 

Our  availability to draw on our $10.0 million revolving note payable was approximately $3.7 million as of March 31, 2011.

 

We intend to seek a renewal of our expiring $10.0 million revolving note payable to a bank due May 31, 2011, our expiring $8.2 million revolving note payable to a bank due June 1, 2011 and our expiring $14.9 million mortgage payable to a bank due June 1, 2011, but can offer no assurance that we will be successful in doing so, or that favorable terms of renewal can be obtained.

 

**Property Transactions**

 

***Acquisitions***

 

During the three months ended March 31, 2011 and 2010, we did not acquire any properties.

 

***Dispositions***

 

During the three months ended March 31, 2011, we did not dispose of any properties.

 

During the three months ended March 31, 2010, we made the following property dispositions:

 
| **Wholly-Owned Properties-Retail** | ** ** | **Square Feet** | ** ** | **Our Ownership** | ** ** | **Date of Sale** | ** ** |
|-----------------------------------------|------------|----------------------|------------|------------------------|------------|----------------------------|------------|
| Outlet Mall (1)                         |       | 162,600              |       | 100                    | %          | March, 2010                |       |

 

----

(1)          Gain of approximately $0.5 million.

 

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

 

**Off-Balance Sheet Arrangements**

 

We have no off-balance sheet arrangements that are reasonably likely to have a current effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

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**Website Information**

 

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

 

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**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 approximately $75.9 million at variable rates.  We anticipate that a hypothetical 100 basis point increase in interest rates would increase interest expense on our variable rate debt by approximately $0.8 million annually.  The average variable interest rate available to us at March 31, 2011 was 3.5%.

 

**Contractual Obligations and Commercial Commitments**

 

The following table represents our obligations and commitments to make future payments as of March 31, 2011 under contracts, such as debt and lease agreements including principal and interest, and under contingent commitments, such as debt guarantees.

 
| ** **                               | ** ** | **Payment Due by Period** | ** **  |
|------------------------------------------|------------|------------------------------------------|-------------|
| ** **                               | ** ** | **Total**                                | ** **  | **Within   One Year** | ** ** | **One – Three   Years** | ** ** | **Three – Five   Years** | ** ** | **After Five   Years** | ** ** |
| **Contractual Obligations**              |       |                                     |        |   |   |   |   |   |   |   |   |
| Mortgages and notes payable              |       | $                                        | 365,611,753 |   | $ | 43,316,663 |   | $ | 33,106,330 |   | $ | 42,630,323 |   | $ | 246,558,437 |   |
| Capital lease obligations                |       | —                                   |        | — |   | — |   | — |   | — |   |
| Operating leases (1)                     |       | —                                   |        | — |   | — |   | — |   | — |   |
| Other long-term obligations (2)          |       | —                                   |        | — |   | — |   | — |   | — |   |
|                                     |       |                                     |        |   |   |   |   |   |   |   |   |
| **Total contractual cash   obligations** |       | $                                        | 365,611,753 |   | $ | 43,316,663 |   | $ | 33,106,330 |   | $ | 42,630,323 |   | $ | 246,558,437 |   |

 

----

| (1) |   | We   are party to numerous small operating leases for office equipment such as   copiers, postage machines and fax machines, which represent an insignificant   obligation.                     |
|-----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) |   | We   are party to several annual maintenance agreements with vendors for such   items as outdoor maintenance, pool service and security systems, which   represent an insignificant obligation. |

 

**Item 4 — Controls and Procedures**

 

**Evaluation of Disclosure Controls and Procedures**

 

As required by Rule 13a-15(b) and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, including our Chief Executive Officer and Chief Financial Officer, evaluated as of March 31, 2011, the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) and Rule 15d-15(e).  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, as of March 31, 2011, were effective for the purpose of ensuring that information required to be disclosed by us in this report is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Exchange Act and is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

 

**Changes in Internal Control over Financial Reporting**

 

There have been no changes in internal control over financial reporting that occurred during the quarter ended March 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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**PART II — OTHER INFORMATION**

 

**Item 1 — Legal Proceedings**

 

None.

 

**Item 1A — Risk Factors**

 

***Our principal unit holders may effectively exercise control over matters requiring unit holder approval.***

 

As of March 31, 2011, Mr. J.D. Nichols beneficially owned approximately 60.7% of the outstanding NTS Realty Holdings Limited Partnership Units.  Mr. Nichols effectively has the power to elect all of the directors and control the management, operations and affairs of NTS Realty Holdings Limited Partnership.  His ownership may discourage someone from making a significant equity investment in NTS Realty Holdings Limited Partnership, even if we needed the investment to operate our business.  His holdings could be a significant factor in delaying or preventing a change of control transaction that other limited partners may deem to be in their best interests, such as a transaction in which the other limited partners would receive a premium for their units over their current trading prices.

 

**Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds**

 

On December 1, 2010, two entities created or controlled by Mr. Nichols commenced pre-arranged trading plans to purchase limited partnership units of NTS Realty pursuant to Rule 10b5-1 under the Act. The trading plans are substantially similar to those previously announced by us in 2009 and 2008.  Each of the plans authorize its administrator, Wells Fargo Investments, LLC, to purchase approximately $26,000 and $52,000, respectively, of NTS Realty’s limited partnership units from time to time through no later than November 2011.  Under the terms of the plans, Mr. Nichols has no discretion or control over the timing, effectuation or the amount of each purchase.

 

During the three months ended March 31, 2011, no units were purchased by the entities created or controlled by Mr. Nichols pursuant to the trading plans announced on December 1, 2010.  The table below summarizes activity pursuant to these plans for the three months ended March 31, 2011.

 
| **Period**         | ** ** | **Total Number of   Units Purchased** | ** ** | **Average Price Paid   Per Unit** | ** ** | **Total Number of   Units Purchased as   Part of Publicly   Announced Plans or   Programs** | ** ** | **Maximum Number   (or Approximate   Dollar Value) of Units   That May Yet Be   Purchased Under the   Plans or Programs** | ** ** |
|--------------------|------------|------------------------------------------------------|------------|--------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| January 2011  |       | —                                               |       | $                                                | N/A        |                                                                                                                                | 482,341    | (2)                                                                                                                                                                                   |       | (1) |
|               |       |                                                 |       |                                             |       |                                                                                                                                |       |                                                                                                                                                                                  |       |
| February 2011 |       | —                                               |       | $                                                | N/A        |                                                                                                                                | 482,341    | (2)                                                                                                                                                                                   |       | (1) |
|               |       |                                                 |       |                                             |       |                                                                                                                                |       |                                                                                                                                                                                  |       |
| March 2011    |       | —                                               |       | $                                                | N/A        |                                                                                                                                | 482,341    | (2)                                                                                                                                                                                   |       | (1) |
|               |       |                                                 |       |                                             |       |                                                                                                                                |       |                                                                                                                                                                                  |       |
| Total              |       | —                                               |       | $                                                | N/A        |                                                                                                                                | 482,341    | (2)                                                                                                                                                                                   |       | (1) |

 

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| (1) | A   description of the maximum amount that may be used to purchase our units   under the trading plans is included in the narrative preceding this table.                                                                                                                 |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Represents   the total number of our limited partnership units that have been purchased   under the trading plans by entities created or controlled by   Mr. Nichols, pursuant to the current or any previous publicly announced   plan or program by trading plans. |

 

**Item 3 — Defaults Upon Senior Securities**

 

None.

 

**Item 4 — Reserved**

 

**Item 5 — Other Information**

 

None.

 

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**Item 6 — Exhibits**

 
| **Exhibit No.** |   |                                                                                                                                                                                                                                                                                                 |   |   |
|----------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
| 2.01                 |   | Agreement   and Plan of Merger by and among NTS Realty Holdings Limited Partnership,   NTS-Properties III, NTS-Properties IV, NTS-Properties V, a Maryland limited   partnership, NTS-Properties VI, a Maryland limited partnership and   NTS-Properties VII, Ltd., dated February 3, 2004 |   | (3)    |
|                 |   |                                                                                                                                                                                                                                                                                                 |   |   |
| 2.02                 |   | Contribution   Agreement by and between NTS Realty Holdings Limited Partnership and ORIG,   LLC, dated February 3, 2004                                                                                                                                                                         |   | (3)    |
|                 |   |                                                                                                                                                                                                                                                                                                 |   |   |
| 3.01                 |   | Certificate   of Limited Partnership of NTS Realty Holdings Limited Partnership                                                                                                                                                                                                                      |   | (1)    |
|                 |   |                                                                                                                                                                                                                                                                                                 |   |   |
| 3.02                 |   | Amended   and Restated Agreement of Limited Partnership of NTS Realty Holdings Limited   Partnership, dated as of December 29, 2005                                                                                                                                                             |   | (7)    |
|                 |   |                                                                                                                                                                                                                                                                                                 |   |   |
| 3.03                 |   | Certificate   of Incorporation of NTS Realty Capital, Inc.                                                                                                                                                                                                                                      |   | (8)    |
|                 |   |                                                                                                                                                                                                                                                                                                 |   |   |
| 3.04                 |   | By-Laws   of NTS Realty Capital, Inc.                                                                                                                                                                                                                                                           |   | (2)    |
|                 |   |                                                                                                                                                                                                                                                                                                 |   |   |
| 10.01                |   | Amended   and Restated Management Agreement between NTS Realty Holdings Limited   Partnership and NTS Development Company, dated as of December 29, 2005                                                                                                                                        |   | (6)    |
|                 |   |                                                                                                                                                                                                                                                                                                 |   |   |
| 10.02                |   | Form of   Lease Agreement between NTS Realty Holdings Limited Partnership and   SHPS, Inc.                                                                                                                                                                                                 |   | (4)    |
|                 |   |                                                                                                                                                                                                                                                                                                 |   |   |
| 10.03                |   | Purchase and Sale Agreement between NTS   Realty Holdings Limited Partnership and Investors Capital Mortgage Group, Inc., dated September 30,   2005 (Golf Brook Apartments)                                                                                                               |   | (5)    |
|                 |   |                                                                                                                                                                                                                                                                                                 |   |   |
| 10.04                |   | Purchase and Sale Agreement between NTS   Realty Holdings Limited Partnership and Investors Capital Mortgage Group, Inc., dated September 30,   2005 (Sabal Park Apartments)                                                                                                               |   | (5)    |
|                 |   |                                                                                                                                                                                                                                                                                                 |   |   |
| 10.05                |   | Agreement for Purchase and Sale between Schaedle Worthington Hyde Properties, L.P.   and NTS Realty Holdings Limited Partnership, dated November 1, 2005 (The Grove at Richland Apartments and The   Grove at Whitworth Apartments)                                                             |   | (5)    |
|                 |   |                                                                                                                                                                                                                                                                                                 |   |   |
| 10.06                |   | Agreement for Purchase and Sale between Schaedle Worthington Hyde Properties, L.P.   and NTS Realty Holdings Limited Partnership, dated November 1, 2005 (The Grove at Swift Creek Apartments)                                                                                                  |   | (5)    |
|                 |   |                                                                                                                                                                                                                                                                                                 |   |   |
| 10.07                |   | Purchase and Sale Agreement between AMLI   at Castle Creek, L.P. and AMLI Residential Properties, L.P. and NTS Realty Holdings Limited Partnership, dated February 7, 2006 (Castle Creek   Apartments and Lake Clearwater Apartments)                                                           |   | (5)    |
|                 |   |                                                                                                                                                                                                                                                                                                 |   |   |
| 10.08                |   | Unconditional   and Continuing Guaranty by NTS Realty Holdings Limited Partnership in favor   of National City Bank, dated March 23, 2006                                                                                                                                                       |   | (5)    |
|                 |   |                                                                                                                                                                                                                                                                                                 |   |   |
| 10.09                |   | Amended   and Restated Master Loan Agreements between NTS Realty Holding Limited   Partnership and The Northwestern Mutual Life Insurance Company and between   NTS Realty Holdings Limited Partnership and National City Bank, dated   October 4, 2006                                         |   | (9)    |
|                 |   |                                                                                                                                                                                                                                                                                                 |   |   |
| 10.10                |   | Purchase and Sale Agreement between NTS Realty   Holdings Limited Partnership and Meridian Realty Investments, LLC, dated   November 10, 2006 (Springs Medical Office Center)                                                                                                                   |   | (10)   |
|                 |   |                                                                                                                                                                                                                                                                                                 |   |   |
| 10.11                |   | Purchase and Sale Agreement between NTS Realty   Holdings Limited Partnership and Meridian Realty Investments, LLC, dated November 10,   2006 (Springs Office Center)                                                                                                                           |   | (10)   |
|                 |   |                                                                                                                                                                                                                                                                                                 |   |   |
| 10.12                |   | Purchase and Sale Agreement between NTS Realty   Holdings Limited Partnership together with Overlook Associates, LLC and The   Northwestern Mutual Life Insurance Company, dated December 8, 2006 (The Overlook   at St. Thomas Apartments)                                                     |   | (11)   |
|                 |   |                                                                                                                                                                                                                                                                                                 |   |   |
| 10.13                |   | Purchase   and Sale Agreement between NTS Realty Holdings Limited Partnership together   with Creek’s Edge Investors, LLC and CG Stony Point, LLC, dated June 20,   2007 (Creek’s Edge at Stony Point Apartments)                                                                     |   | (12)   |
|                 |   |                                                                                                                                                                                                                                                                                                 |   |   |
| 10.14                |   | Purchase   and Sale Agreement between NTS Realty Holdings Limited Partnership and Ascent   Properties, LLC, dated August 1, 2007 (The Office Portfolio)                                                                                                                                         |   | (13)   |
|                 |   |                                                                                                                                                                                                                                                                                                 |   |   |
| 10.15                |   | Purchase   and Sale Agreement between NTS Realty Holdings Limited Partnership and   Colonial Realty Limited Partnership and Colonial Properties   Services, Inc., dated June 11, 2008 (Shelby Farms Apartments)                                                                            |   | (14)   |
|                 |   |                                                                                                                                                                                                                                                                                                 |   |   |
| 10.16                |   | Purchase   and Sale Agreement between NTS Realty Holdings Limited Partnership and 302   Sabal Park Place Longwood, LLC and 385 Golf Brook Circle Longwood, LLC dated   April 10, 2009 (Sabal Park   Apartments and Golf Brook   Apartments)                                                     |   | (15)   |

 

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| **Exhibit No.** |   |                                                                                                                                                                    |   |   |
|----------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
| 10.17                |   | Purchase   and Sale Agreement between NTS Realty Holdings Limited Partnership and Corac,   LLC, dated December 23, 2010 (Lakes Edge Apartments)                    |   | (16)   |
|                 |   |                                                                                                                                                                    |   |   |
| 14.01                |   | Code   of Conduct and Ethics of NTS Realty Holdings Limited Partnership, adopted as   of December 28, 2004                                                         |   | (4)    |
|                 |   |                                                                                                                                                                    |   |   |
| 31.1                 |   | Certification   of Chief Executive Officer Pursuant to Rule 13a-14(a) and   Rule 15d-14(a) of the Securities Exchange Act, as amended               |   | (17)   |
|                 |   |                                                                                                                                                                    |   |   |
| 31.2                 |   | Certification   of Chief Financial Officer Pursuant to Rule 13a-14(a) and   Rule 15d-14(a) of the Securities Exchange Act, as amended               |   | (17)   |
|                 |   |                                                                                                                                                                    |   |   |
| 32.1                 |   | Certification   of Chief Executive Officer Pursuant to U.S.C. 1350, as adopted pursuant to   Section 906 of the Sarbanes-Oxley Act of 2002                         |   | (17)   |
|                 |   |                                                                                                                                                                    |   |   |
| 32.2                 |   | Certification   of Chief Financial Officer Pursuant to U.S.C. 1350, as adopted pursuant to   Section 906 of the Sarbanes-Oxley Act of 2002                         |   | (17)   |
|                 |   |                                                                                                                                                                    |   |   |
| 99.01                |   | Form of   Lock-Up Agreement by and between NTS Realty Holdings Limited Partnership and   each of the executive officers of NTS Realty Capital, Inc.           |   | (1)    |
|                 |   |                                                                                                                                                                    |   |   |
| 99.02                |   | Registration   Statement on Form S-4/A (Amendment No. 5), as filed by the   Registrant with the Securities and Exchange Commission on October 27,   2004 |   | (3)    |

 

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| (1)  | Incorporated   by reference to the Registrant’s Registration Statement on Form S-4, as   filed with the Securities and Exchange Commission on February 4, 2004                                    |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  | Incorporated   by reference to the Registrant’s Registration Statement on Form S-4/A   (Amendment No. 1), as filed with the Securities and Exchange Commission   on June 18, 2004            |
| (3)  | Incorporated   by reference to the Registrant’s Registration Statement on Form S-4/A   (Amendment No. 5), as filed with the Securities and Exchange Commission   on October 27, 2004         |
| (4)  | Incorporated   by reference to the Registrant’s Annual Report on Form 10-K for the year   ended December 31, 2004, as filed with the Securities and Exchange   Commission on March 31, 2005  |
| (5)  | Incorporated   by reference to the Registrant’s Annual Report on Form 10-K for the year   ended December 31, 2005, as filed with the Securities and Exchange   Commission on April 3, 2006   |
| (6)  | Incorporated   by reference to the Registrant’s Current Report on Form 8-K, as filed   with the Securities and Exchange Commission on April 17, 2006                                              |
| (7)  | Incorporated   by reference to the Registrant’s Information Statement on Form DEF 14C,   as filed with the Securities and Exchange Commission on May 9, 2006                                      |
| (8)  | Incorporated   by reference to the Registrant’s Quarterly Report on Form 10-Q for the   quarter ended March 31, 2006, as filed with the Securities and Exchange   Commission on May 15, 2006 |
| (9)  | Incorporated   by reference to the Registrant’s Current Report on Form 8-K/A, as filed   with the Securities and Exchange Commission on October 23, 2006                                          |
| (10) | Incorporated   by reference to the Registrant’s Current Report on Form 8-K, as filed   with the Securities and Exchange Commission on February 14, 2007                                           |
| (11) | Incorporated   by reference to the Registrant’s Current Report on Form 8-K, as filed   with the Securities and Exchange Commission on March 16, 2007                                              |
| (12) | Incorporated   by reference to the Registrant’s Current Report on Form 8-K, as filed   with the Securities and Exchange Commission on August 17, 2007                                             |
| (13) | Incorporated   by reference to the Registrant’s Current Report on Form 8-K, as filed   with the Securities and Exchange Commission on May 1, 2008                                                 |
| (14) | Incorporated   by reference to the Registrant’s Current Report on Form 8-K, as filed   with the Securities and Exchange Commission on June 27, 2008                                               |
| (15) | Incorporated   by reference to the Registrant’s Current Report on Form 8-K, as filed   with the Securities and Exchange Commission on June 16, 2009                                               |
| (16) | Incorporated   by reference to the Registrant’s Current Report on Form 8-K, as filed   with the Securities and Exchange Commission on December 23, 2010                                           |
| (17) | Filed   herewith                                                                                                                                                                                                 |

 

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**SIGNATURES**

 

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

 
| ** ** | **NTS REALTY HOLDINGS LIMITED PARTNERSHIP** |
|------------|---------------------------------------------|
|       |                                        |   |
|       | By:                                         | NTS REALTY CAPITAL, INC. |
|       |                                        | Its: | Managing General Partner |
|       |                                        |   |   |   |
|       |                                        | By: | */s/ Brian F. Lavin* |
|       |                                        |   | Brian F. Lavin |
|       |                                        |   | Its: | President and Chief Executive Officer |
|       |                                        |   |   | (Principal Executive Officer) |
|       |                                        |   | Date: | May 5, 2011 |
|       |                                        |   |   |   |
|       |                                        | By: | */s/ Gregory A. Wells* |
|       |                                        |   | Gregory A. Wells |
|       |                                        |   | Its: | Chief Financial Officer |
|       |                                        |   |   | (Principal Financial Officer and Principal Accounting Officer) |
|       |                                        |   | Date: | May 5, 2011 |

 

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