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

# FORM 10-Q

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

For the quarterly
period ended March 31, 2006

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

Delaware
(State of incorporation or organization)

001-32389
(Commission File No.)

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

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

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

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

Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
See definition of accelerated filer and large accelerated filer in Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated filer  [   ]      Accelerated filer  [   ]      Non-accelerated filer  [X]

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

As of May 12, 2006, there were
11,381,608 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  | 
|Balance Sheets as of March 31, 2006 and December 31, 2005                                      |  | 4  | 
|Statement of Partners' Equity as of March 31, 2006                                             |  | 4  | 
|Statements of Operations for the Three Months Ended March 31, 2006 and 2005                    |  | 5  | 
|Statements of Cash Flows for the Three Months Ended March 31, 2006 and 2005                    |  | 6  | 
|Notes to Financial Statements                                                                  |  | 7  | 
|Item 2  Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 18 | 
|Item 3  Quantitative and Qualitative Disclosures About Market Risk                            |  | 26 | 
|Item 4  Controls and Procedures                                                               |  | 26 | 
|                                                                                               | 
|PART II  OTHER INFORMATION                                                                    |  | 27 | 
|                                                                                               | 
|Item 1  Legal Proceedings                                                                     |  | 27 | 
|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  Submission of Matters to a Vote of Security Holders                                   |  | 28 | 
|Item 5  Other Information                                                                     |  | 28 | 
|Item 6  Exhibits                                                                              |  | 28 | 
|SIGNATURES                                                                                     |  | 30 | 
|                                                                                               | 

2

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# INFORMATION REGARDING
FORWARD-LOOKING STATEMENTS

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

Any
forward-looking statements included in MD&A, or elsewhere in this report, reflect our
managing general partners best judgment based on known factors, but involve risks
and uncertainties. Actual results could differ materially from those anticipated in any
forward-looking statements as a result of a number of factors, including but not limited
to those described in our filings with the Securities and Exchange Commission,
particularly our most recent annual report on Form 10-K, which was filed on April 3, 2006.
Any forward-looking information provided by us pursuant to the safe harbor established by
the Private Securities Litigation Reform Act of 1995 should be evaluated in the context of
these factors.

3

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# PART I  FINANCIAL INFORMATION
Item 1  Financial Statements

NTS REALTY HOLDINGS LIMITED PARTNERSHIP
Balance Sheets as of March 31, 2006 and December 31, 2005

|                                                                        | (Unaudited) |  |   |             | 
|----------------------------------------------------------------------- | ----------- |  | - | ----------- | 
|
|ASSETS:                                                                 |             |  |   |             | 
|Cash and equivalents                                                    |             |  | $ | 21,350      | 
|Cash and equivalents - restricted                                       |             |  |   | 436,499     | 
|Accounts receivable, net of allowance for doubtful accounts of $260,945 |             |  |   |             | 
|at March 31, 2006 and $342,002 at December 31, 2005                     |             |  |   | 2,166,451   | 
|Land, buildings and amenities, net                                      |             |  |   | 308,825,055 | 
|Long-lived assets held for sale                                         |             |  |   | 5,350,179   | 
|Other assets                                                            |             |  |   | 9,599,800   | 
|                                                                        |             |  |   |            
|Total assets                                                            |             |  | $ | 326,399,334 | 
|                                                                        |             |  |   |            
|LIABILITIES:                                                            |             | 
|Mortgages and notes payable                                             |             |  | $ | 229,322,181 | 
|Accounts payable and accrued expenses                                   |             |  |   | 2,658,921   | 
|Accounts payable and accrued expenses due to affiliate                  |             |  |   | 1,515,642   | 
|Distributions payable                                                   |             |  |   | 1,138,161   | 
|Security deposits                                                       |             |  |   | 1,072,266   | 
|Long-lived liabilities held for sale                                    |             |  |   | 103,057     | 
|Other liabilities                                                       |             |  |   | 2,594,843   | 
|                                                                        |             |  |   |            
|Total liabilities                                                       |             |  |   | 238,405,071 | 
|                                                                        |             |  |   |             | 
|COMMITMENTS AND CONTINGENCIES (NOTE 11)                                 |             | 
|                                                                        |             |  |   |             | 
|PARTNERS' EQUITY                                                        |             |  |   | 87,994,263  | 
|                                                                        |             |  |   |            
|Total liabilities and partners' equity                                  |             |  | $ | 326,399,334 | 
|                                                                        |             |  |   |            

NTS REALTY HOLDINGS LIMITED PARTNERSHIP
Statement of Partners' Equity as of March 31, 2006
(Unaudited)

|                                      | General
Partner
Interests |  | Limited
Partners
Interests |         | General
Partner |  | Limited
Partners |  | Total |           |  
|------------------------------------- | ------------------------- |  | -------------------------- | ------- | --------------- |  | ---------------- |  | ----- | --------- | -
|PARTNERS' EQUITY:                     |                           |  |                            |         |                 |  |                  |  |       |           |  
|Initial equity                        |                           |  |                            | 714,491 |                 |  | 10,667,117       |  | $     | 3,131,381 |  
|Net loss prior year                   |                           |  |                            | --      |                 |  | --               |  |       | (134,392  | )
|Net income current year               |                           |  |                            | --      |                 |  | --               |  |       | 2,955,634 |  
|Cash  distributions  declared to date |                           |  |                            | --      |                 |  | --               |  |       | (428,695  | )
|                                      |                           |  |                            |         |                 |  |                  |  |       |          
|Balances on March 31, 2006            |                           |  |                            | 714,491 |                 |  | 10,667,117       |  | $     | 5,523,928 |  
|                                      |                           |  |                            |         |                 |  |                  |  |       |          

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

4

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NTS REALTY HOLDINGS LIMITED PARTNERSHIP
Statements of Operations for the Three Months Ended March 31, 2006 and 2005
(Unaudited)

|                                                                      | 2006 |  | 2005
|--------------------------------------------------------------------- | ---- |  | ----
|REVENUE:                                                              |      |  |     
|Rental income                                                         |      |  | $   
|Tenant reimbursements                                                 |      |  |     
|                                                                      |      |  |     
|Total revenue                                                         |      |  |     
|                                                                      |      |  |     
|EXPENSES:                                                             |      | 
|Operating expenses                                                    |      |  |     
|Operating expenses reimbursed to affiliate                            |      |  |     
|Management fees                                                       |      |  |     
|Property taxes and insurance                                          |      |  |     
|Professional and administrative expenses                              |      |  |     
|Professional and administrative expenses reimbursed to affiliate      |      |  |     
|Depreciation and amortization                                         |      |  |     
|                                                                      |      |  |     
|Total operating expenses                                              |      |  |     
|                                                                      |      |  |     
|OPERATING INCOME                                                      |      |  |     
|                                                                      |      |  |     
|Interest and other income                                             |      |  |     
|Interest expense                                                      |      |  |     
|Loss on disposal of assets                                            |      |  |     
|                                                                      |      |  |     
|LOSS FROM CONTINUING OPERATIONS                                       |      |  |     
|Discontinued operations, net                                          |      |  |     
|Gain on sale of discontinued operations                               |      |  |     
|                                                                      |      |  |     
|NET INCOME (LOSS)                                                     |      |  | $   
|                                                                      |      |  |     
|Loss from continuing operations allocated to limited partners         |      |  | $   
|Discontinued operations, net allocated to limited partners            |      |  |     
|Gain on sale of discontinued operations allocated to limited partners |      |  |     
|                                                                      |      |  |     
|NET INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS                       |      |  | $   
|                                                                      |      |  |     
|Loss from continuing operations per limited partnership unit          |      |  | $   
|Discontinued operations, net per limited partnership unit             |      |  |     
|Gain on sale of discontinued operations per limited partnership unit  |      |  |     
|                                                                      |      |  |     
|NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT                        |      |  | $   
|                                                                      |      |  |     
|Number of limited partnership interests                               |      |  |     
|                                                                      |      |  |     

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

5

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NTS REALTY HOLDINGS LIMITED PARTNERSHIP
Statements of Cash Flows for the Three Months Ended March 31, 2006 and 2005
(Unaudited)

|                                                                                           | 2006 |  | 2005
|------------------------------------------------------------------------------------------ | ---- |  | ----
|OPERATING ACTIVITIES:                                                                      |      |  |     
|Net income (loss)                                                                          |      |  | $   
|Adjustments  to reconcile  net income (loss) to net cash provided by operating activities: |      |  |     
|Gain from sale of discontinued assets                                                      |      |  |     
|Loss on disposal of assets                                                                 |      |  |     
|Depreciation and amortization                                                              |      |  |     
|Write-off of loan costs                                                                    |      |  |     
|Changes in assets and liabilities:                                                         |      | 
|Cash and equivalents - restricted                                                          |      |  |     
|Accounts receivable                                                                        |      |  |     
|Other assets                                                                               |      |  |     
|Accounts payable and accrued expenses                                                      |      |  |     
|Accounts payable and accrued expenses due to affiliate                                     |      |  |     
|Distributions declared payable                                                             |      |  |     
|Security deposits                                                                          |      |  |     
|Other liabilities                                                                          |      |  |     
|                                                                                           |      |  |     
|Net cash provided by operating activities                                                  |      |  |     
|                                                                                           |      |  |     
|INVESTING ACTIVITIES:                                                                      |      | 
|Additions to land, buildings and amenities                                                 |      |  |     
|Proceeds from sale of discontinued operations                                              |      |  |     
|Acquisitions                                                                               |      |  |     
|Cash and equivalents - restricted                                                          |      |  |     
|                                                                                           |      |  |     
|Net cash used in investing activities                                                      |      |  |     
|                                                                                           |      |  |     
|FINANCING ACTIVITIES:                                                                      |      | 
|Proceeds from mortgages and notes payable                                                  |      |  |     
|Proceeds from revolving note payable                                                       |      |  |     
|Principal payments on mortgages and notes payable                                          |      |  |     
|Payoff of note payable                                                                     |      |  |     
|Payoff of revolving note payable                                                           |      |  |     
|Additions to loan costs                                                                    |      |  |     
|                                                                                           |      |  |     
|Net cash provided by financing activities                                                  |      |  |     
|                                                                                           |      |  |     
|NET (DECREASE) INCREASE IN CASH AND EQUIVALENTS                                            |      |  |     
|                                                                                           |      |  |     
|CASH AND EQUIVALENTS, beginning of period                                                  |      |  |     
|                                                                                           |      |  |     
|CASH AND EQUIVALENTS, end of period                                                        |      |  | $   
|                                                                                           |      |  |     
|NON-CASH INVESTING AND FINANCING ACTIVITIES:                                               |      | 
|Acquisitions of land, buildings and amenities by debt assumption                           |      |  | $   
|                                                                                           |      |  |     
|Mortgage payable assumed in acquisition                                                    |      |  | $   
|                                                                                           |      |  |     

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

6

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NTS REALTY HOLDINGS LIMITED PARTNERSHIP
Notes to Financial Statements
(Unaudited)

The
unaudited financial statements included herein should be read in conjunction with NTS
Realty Holdings Limited Partnerships (NTS Realty) 2005 annual report on
Form 10-K as filed with the Securities and Exchange Commission on April 3, 2006. In the
opinion of our managing general partner, all adjustments, consisting only of normal
recurring accruals, necessary for a fair presentation have been made to the accompanying
financial statements for the three months ended March 31, 2006 and 2005. The results of
operations for the interim periods are not necessarily indicative of the results that may
be expected for the full year or any other interim period. As used in this quarterly
report on Form 10-Q the terms we, us or our, as the
context requires, may refer to NTS Realty or its interests in its properties.

# Note 1  Summary of
Significant Accounting Policies

Organization
and Distribution Policy

We
are in the business of developing, constructing, owning and operating multifamily
properties, commercial and retail real estate and land leases. At March 31, 2006, we owned
thirty-one properties, comprised of nine multifamily properties; eighteen office and
business centers; three retail properties; and one ground lease. The properties are
located in and around Louisville (19) and Lexington (1), Kentucky; Fort Lauderdale (3),
Florida; Indianapolis (4), Indiana; Nashville (2), Tennessee; Richmond (1), Virginia; and
Atlanta (1), Georgia. Our office and business centers aggregate approximately 1.7 million
square feet. We own multifamily properties containing approximately 2,540 units and retail
properties containing approximately 210,000 square feet of space, as well as one ground
lease associated with a 120-space parking lot attached to one of our properties.

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

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

We
paid quarterly distributions of $0.10 per unit to limited partners on April 14, 2006.

# 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.

7

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Certain
reclassifications have been made to the March 31, 2005 and December 31, 2005 financial
statements to conform to the March 31, 2006 classifications. These reclassifications have
no effect on previously reported operating results or partners equity.

# Note 3  Real
Estate Transactions

Acquisitions

During
the three months ended March 31, 2006 and the year ended December 31, 2005, we had
property acquisitions summarized as follows:

|Property                            | Our Ownership | Date of Purchase | Purchase Price
|----------------------------------- | ------------- | ---------------- | --------------
|
|The Lakes Apartments                | 100%          | August 26, 2005  | $  15,975,000 
|The Grove at Richland Apartments    | 100%          | February 3, 2006 | 45,757,500    
|The Grove at Swift Creek Apartments | 100%          | February 3, 2006 | 27,200,000    
|The Grove at Whitworth Apartments   | 100%          | February 3, 2006 | 44,254,500    
|Castle Creek Apartments             | 100%          | March 23, 2006   | 27,000,000    
|Lake Clearwater Apartments          | 100%          | March 23, 2006   | 23,000,001    

On
August 24, 2005, we closed on a $20.0 million line of credit from PNC Bank, National
Association. We used a portion of the proceeds from the line of credit to pay the purchase
price for The Lakes Apartments, pending permanent financing. On March 23, 2006, the line
of credit was increased to $24.0 million to assist in future acquisitions and other
working capital needs.

On
August 26, 2005, we purchased The Lakes Apartments, located adjacent to Willow Lake
Apartments, in Indianapolis, Indiana. The Lakes is a 230-unit luxury multifamily property
which includes amenities such as a fitness center, car wash, swimming pool and lighted
tennis court.

On
November 1, 2005, we announced that we entered into two agreements to purchase two
multifamily properties located in Nashville, Tennessee and one multifamily property
located in Richmond, Virginia from an unaffiliated Delaware limited partnership. Subject
to the terms and conditions of the agreements, we agreed to pay approximately $117.2
million for the properties. The properties in Nashville consist of apartment complexes
with 292 units and 301 units, respectively, while the Richmond property has 240 units.

On
February 3, 2006, we closed on our two agreements to purchase two multifamily properties
located in Nashville, Tennessee and one agreement to purchase a multifamily property in
Richmond, Virginia for a purchase price totaling approximately $117.2 million (a portion
of which was satisfied by the assumption of a mortgage loan with an outstanding balance of
approximately $33.4 million). The Tennessee properties are commonly known as The Grove at
Richland and The Grove at Whitworth, while the Virginia property is commonly known as The
Grove at Swift Creek.

On
February 7, 2006, we announced that we entered into an agreement to purchase two
multifamily properties located in Indianapolis, Indiana. These properties are commonly
known as AMLI at Castle Creek and AMLI at Lake Clearwater. Castle Creek has 276 units and
Lake Clearwater has 216 units. Subject to the terms and conditions of the agreement, we
agreed to pay a purchase price totaling approximately $50.0 million.

On
March 23, 2006, we closed on our agreement to purchase the two multifamily properties
located in Indianapolis, Indiana, using a bank loan of approximately $42.5 million,
guaranteed by the partnership, and an advance on our line of credit for the balance.

8

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The
acquisitions were accounted for using the purchase method of accounting in accordance
with SFAS No. 141 Business Combinations. The assets and liabilities purchased
were recorded at their fair market value at the date of the acquisition. We allocated the
purchase price for each of the properties to net tangible and identified intangible
assets 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. For the 2006 acquisitions listed above, we recorded
land, buildings and amenities for the acquired in-place leases of approximately $166.7
million. We also recorded approximately $200,000 in security deposits and approximately $541,000
in prepaid liabilities and accrued property taxes. We recorded an intangible asset for the acquired in-place leases of
approximately $657,000, which is included in other assets. This will be amortized over a
period of one year, which approximates the weighted average lease lives. Amortization of
approximately $50,000 was included in our amortization expense for the three months ended
March 31, 2006. No above or below market leases or customer relationship intangibles
exist. At the date of the acquisitions, the carrying value of mortgages and other
liabilities approximated fair market value. We retained an independent appraiser to
assess fair value based on estimated cash flow projections that utilize discount and
capitalization rates deemed appropriate and available market information.

Pro
Forma

The
following table presents our unaudited pro forma results of operations and per unit
amounts as if we had consummated our 2006 and 2005 acquisitions as of the beginning of
each period presented.

|                                                             | (Unaudited)
|------------------------------------------------------------ | -----------
|
|
|Revenues                                                     |            
|Expenses and other income, net                               |            
|                                                             |            
|Loss from continuing operations                              |            
|                                                             |            
|Net income/(loss)                                            |            
|                                                             |            
|Loss from continuing operations allocated to limited partner |            
|                                                             |            
|Net income/(loss) allocated to limited partners              |            
|                                                             |            
|Loss from continuing operations per limited partnership unit |            
|                                                             |            
|Net income/(loss) per limited partnership unit               |            
|                                                             |            
|Number of limited partnership interests                      |            
|                                                             |            

Dispositions

On
February 2, 2006, we closed on our agreements to sell Golf Brook Apartments and Sabal Park
Apartments, our multifamily properties located in Orlando, Florida, to an unaffiliated
Florida corporation for a purchase price of approximately $71.5 million, resulting in a
gain of approximately $48.3 million.

During
the three months ended March 31, 2006, we had property dispositions summarized as follows:

|Property              | Our Ownership | Date of Sale     | Purchase Price
|--------------------- | ------------- | ---------------- | --------------
|Golf Brook Apartments | 100%          | February 2, 2006 | $  43,153,500 
|Sabal Park Apartments | 100%          | February 2, 2006 | 28,350,000    

On March
6, 2006, we announced that we entered into an agreement to sell Commonwealth Business
Center Phases I and II, two of our business centers located in Jefferson County, Kentucky,
to an unaffiliated Kentucky limited liability company for $7.1 million.

9

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We
have presented separately as discontinued operations in all periods the results of
operations for Golf Brook Apartments, Sabal Park Apartments and Commonwealth Business
Centers I and II. The assets and liabilities held for sale have been separately identified
on our balance sheets at March 31, 2006 and December 31, 2005.

The
components of discontinued operations are outlined below and include the results of
operations for the respective periods in which we owned such assets during the three
months ended March 31, 2006 and 2005.

|                                                                  | (Unaudited) |  | (Unaudited)
|----------------------------------------------------------------- | ----------- |  | -----------
|
|REVENUE:                                                          |             |  |            
|Rental income                                                     |             |  | $          
|Tenant reimbursements                                             |             |  |            
|                                                                  |             |  |            
|Total revenue                                                     |             |  |            
|                                                                  |             |  |            
|EXPENSES:                                                         |             | 
|Operating expenses and operating expenses reimbursed to affiliate |             |  |            
|Management fees                                                   |             |  |            
|Property taxes and insurance                                      |             |  |            
|Depreciation and amortization                                     |             |  |            
|                                                                  |             |  |            
|Total expenses                                                    |             |  |            
|                                                                  |             |  |            
|DISCONTINUED OPERATING INCOME                                     |             |  |            
|                                                                  |             |  |            
|Interest and other income                                         |             |  |            
|Interest expense                                                  |             |  |            
|Loss on disposal of assets                                        |             |  |            
|Gain on sale of discontinued operations                           |             |  |            
|                                                                  |             |  |            
|Discontinued operations, net                                      |             |  | $          
|                                                                  |             |  |            

The
components of long-lived assets held for sale consist primarily of land, buildings and
amenities for the properties being sold. The components of long-lived liabilities held for
sale include the accrued property tax liabilities and security deposit liabilities for the
properties being sold.

# Note 4 
Concentration of Credit Risk

We
own and operate multifamily properties, commercial and retail real estate and a land lease
in Louisville and Lexington, Kentucky, Fort Lauderdale, Florida, Indianapolis, Indiana,
Nashville, Tennessee, Richmond, Virginia and Atlanta, Georgia.

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

# Note 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.

10

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# 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 5-30 years for land improvements, 7-30 years for buildings and improvements and
5-30 years for amenities. Tenant improvements are generally depreciated over the life of
the initial or renewal term of the respective tenant lease. Depreciation expense for the
three months ended March 31, 2006 and 2005 was approximately $2,708,000 and $1,494,000,
respectively.

Statement
of Financial Accounting Standards (SFAS) No. 144 Accounting for the
Impairment or Disposal of Long-Lived Assets, specifies circumstances in which
certain long-lived assets must be reviewed for impairment. If the carrying amount of an
asset exceeds the sum of its expected future cash flows, the assets carrying value
must be written down to fair value. In determining the value of an investment property and
whether the investment property is impaired, management considers several factors such as
projected rental and vacancy rates, property operating expenses, capital expenditures and
interest rates. The capitalization rate used to determine property valuation is based on
the market in which the investment property is located, length of leases, tenant financial
strength, the economy in general, demographics, environment, property location,
visibility, age and physical condition among others. All of these factors are considered
by management in determining the value of any particular investment property. The value of
any particular investment property is sensitive to the actual results of any of these
factors, either individually or taken as a whole. If the actual results differ from
managements judgment, the valuation could be negatively or positively affected.
Application of this standard during the three months ended March 31, 2006 and 2005 did not
result in an impairment loss.

11

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# Note 8  Mortgages
and Notes Payable

Mortgages
and notes payable consist of the following:

|                                                                        | (Unaudited) |  |  
|----------------------------------------------------------------------- | ----------- |  | -
|
|Mortgage payable to an insurance company in monthly installments,       |             |  |  
|bearing interest at 5.07%, maturing on March 15, 2015, secured by       |             | 
|certain land and buildings, with a carrying value of $28,434,317        |             |  | $
|                                                                        |             |  |  
|Mortgage payable to a bank in monthly installments, bearing interest at |             |  |  
|a variable rate based on LIBOR one-month rate plus 2.50%, currently     |             | 
|7.13%, due January 1, 2008, secured by certain land and buildings, with |             |  |  
|a carrying value of $16,895,909.  The mortgage is guaranteed by Mr.     |             | 
|Nichols (75%) and Mr. Lavin (25%)                                       |             |  |  
|                                                                        |             |  |  
|Mortgage payable to an insurance company in monthly installments,       |             | 
|bearing interest at 5.98%, maturing January 15, 2015, secured by        |             | 
|certain land and buildings, with a carrying value of $166,098,207       |             |  |  
|                                                                        |             |  |  
|Mortgage payable to an insurance company in monthly installments,       |             | 
|bearing interest at 5.35%, maturing January 15, 2015, secured by        |             | 
|certain land and buildings, with a carrying value of $166,098,207       |             |  |  
|                                                                        |             |  |  
|Revolving note payable to a bank for $24.0 million, with interest       |             | 
|payable in monthly installments, unsecured, at a variable rate based on |             |  |  
|LIBOR plus 1.75%, currently 6.58%, due August 24, 2006                  |             |  |  
|                                                                        |             |  |  
|Mortgage payable to a bank in monthly installments, bearing interest at |             |  |  
|9.00%, maturing August 1, 2010, secured by certain land and a building  |             |  |  
|with a carrying value of $2,905,923                                     |             |  |  
|                                                                        |             |  |  
|Mortgage payable to an insurance company in monthly installments,       |             | 
|bearing interest at 8.45%, maturing November 1, 2015, secured by        |             | 
|certain land and a building, with a carrying value of $2,490,340        |             |  |  
|                                                                        |             |  |  
|Mortgage payable to an insurance company in monthly installments,       |             | 
|bearing interest at 8.375%, maturing December 1, 2010, secured by       |             | 
|certain land, buildings and amenities, with a carrying value of         |             | 
|$2,721,545                                                              |             |  |  
|                                                                        |             |  |  
|Mortgage payable to a bank in monthly installments, bearing interest at |             |  |  
|5.11%, maturing December 1, 2014, secured by certain land and           |             | 
|buildings, with a carrying value of $15,411,224                         |             |  |  
|                                                                        |             |  |  
|Note payable to a bank, bearing interest at LIBOR plus 2.50%, maturing  |             | 
|October 1, 2006                                                         |             |  |  
|                                                                        |             |  |  
|                                                                        |             |  | $
|                                                                        |             |  |  

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, 2006 was approximately $211.6
million.

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, 2006. We intend to renew or refinance our
notes payable coming due in the next twelve months.

# Note 9  Accounts
Payable and Accrued Expenses Due to Affiliate

Accounts
payable and accrued expenses due to affiliate includes amounts owed to NTS Development
Company for reimbursement of employee costs and overhead expenses and fees for services
rendered as provided for in our management agreement.

12

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# Note 10  Related
Party Transactions

On
April 11, 2006, pursuant to the terms of the settlement agreement with respect to the
class action litigation involving the Partnerships, the independent directors of our
managing general partner approved an amended and restated management agreement with NTS
Development Company, an affiliate of NTS Realtys general partner. The independent
directors engaged a nationally recognized real estate expert to assist them in their
review of the management agreement entered into as of December 28, 2004. The amended and
restated management agreement became effective as of December 29, 2005.

Pursuant
to the agreement with us, NTS Development Company receives property management fees and
repair and maintenance fees. The property management fees are paid in an amount equal to
5% of the gross collected revenue from our properties. The construction supervision fees
are paid in an amount equal to 5% of the costs incurred which relate to capital
improvements. These construction supervision fees are capitalized as part of land,
buildings and amenities. Also pursuant to the agreement, NTS Development Company receives
commercial leasing fees equal to 4% of the gross rental amount for new leases and 2% of
the gross rental amount for new leases in which a broker is used and for renewals or
extensions. NTS Development Company is reimbursed its actual costs for services rendered
to NTS Realty.

Employee
costs are allocated amongst 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 amounts pursuant to an agreement with NTS Development Company
for the three months ended March 31, 2006 and 2005. These charges include items which have
been expensed as operating expenses reimbursed to affiliate or professional and
administrative expenses reimbursed to affiliate and items which have been capitalized as
other assets or as land, buildings and amenities. Certain of these items are included in
our results of discontinued operations.

|                                                                 | (Unaudited) |  | (Unaudited)
|---------------------------------------------------------------- | ----------- |  | -----------
|
|Property management fees                                         |             |  | $          
|                                                                 |             |  |            
|Operating expenses reimbursement - Property                      |             |  |            
|Operating expenses reimbursement - Leasing                       |             |  |            
|Operating expenses reimbursement - Administrative                |             |  |            
|Operating expenses reimbursement - Other                         |             |  |            
|                                                                 |             |  |            
|Total operating expenses reimbursed to affiliate                 |             |  |            
|                                                                 |             |  |            
|Professional and administrative expenses reimbursed to affiliate |             |  |            
|                                                                 |             |  |            
|Construction supervision fees                                    |             |  |            
|Commercial leasing fees                                          |             |  |            
|                                                                 |             |  |            
|Total related party transactions                                 |             |  | $          
|                                                                 |             |  |            

Property,
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, 2006 and 2005, we were charged approximately $24,000 and
$15,000, respectively, for property maintenance fees from affiliates of NTS Development
Company.

13

---

NTS
Development Company leased 20,368 square feet in NTS Center, at a rental rate of $14.50
per square foot. We received rental payments of approximately $74,000 from NTS Development
Company during the three months ended March 31, 2006 and 2005. The average per square foot
rental rate for similar space in NTS Center as of March 31, 2006 was $14.18 per square
foot.

NTS
Development Company leased 1,604 square feet in Commonwealth Business Center Phase I, at a
rental rate of $5.50 per square foot. We received rental payments of approximately $2,000
from NTS Development Company during the three months ended March 31, 2006 and 2005. The
average per square foot rental rate for similar space as of March 31, 2006 was $5.50 per
square foot.

Pursuant
to the amended and restated management agreement with us, NTS Development Company received
a disposition fee equal to 1% of the sales price of Golf Brook Apartments and Sabal Park
Apartments. The total fee was $715,035, which is included in discontinued operations on
our statement of operations.

# Note 11 
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

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

On
June 11, 2004, several class members who objected to the settlement agreement but whose
objections were overruled by the Superior Court, filed an appeal in the Court of Appeal of
the State of California, First Appellate District. On July 28, 2005, the Court of Appeal
issued its decision affirming the Superior Courts approval of the settlement, and
rejecting the objectors arguments. On October 5, 2005, the Court of Appeal of the
State of California, First Appellate District entered a Remittitur Order stating that the
time for appeal had expired and that the judgment of the Appellate Court was final. This
effectively concludes the litigation. The matter was then sent back to the Superior Court
of the State of California for the County of Contra Costa in order to conduct proceedings
to effectuate the settlement.

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

14

---

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

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

On
July 7, 2005, two of the plaintiffs in the Kentucky Litigation voluntarily dismissed their
claims against the defendants. The Former General Partners believe that these dismissals
affect the value and scope of plaintiffs claims. Accordingly, defendants remanded
the hearing on the motion to dismiss originally scheduled for July 15, 2005, in order to
properly advise the Court of the effect of the voluntary dismissals. A hearing on the
motion to dismiss has been rescheduled for September 29, 2006.

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

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

15

---

# Note 12  Segment
Reporting

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

|                                         | (Unaudited)
|---------------------------------------- | -----------
|
|
|Rental income                            |            
|Tenant reimbursements                    |            
|                                         |            
|Total revenue                            |            
|                                         |            
|Operating expenses and operating         |            
|expenses reimbursed to affiliate         |            
|Management fees                          |            
|Property taxes and insurance             |            
|Professional and administrative expenses |            
|and professional and administrative      |            
|expenses reimbursed to affiliate         |            
|Depreciation and amortization            |            
|                                         |            
|Total operating expenses                 |            
|                                         |            
|Operating income (loss)                  |            
|                                         |            
|Interest and other income                |            
|Interest expense                         |            
|Loss on disposal of assets               |            
|                                         |            
|(Loss) income from continuing            |            
|operations                               |            
|Discontinued operations, net             |            
|Gain on sale of discontinued operations  |            
|                                         |            
|Net income (loss)                        |            
|                                         |            

16

---

|                                         | (Unaudited)
|---------------------------------------- | -----------
|
|
|Rental income                            |            
|Tenant reimbursements                    |            
|                                         |            
|Total revenue                            |            
|                                         |            
|Operating expenses and operating         |            
|expenses reimbursed to affiliate         |            
|Management fees                          |            
|Property taxes and insurance             |            
|Professional and administrative expenses |            
|and professional and administrative      |            
|expenses reimbursed to affiliate         |            
|Depreciation and amortization            |            
|                                         |            
|Total operating expenses                 |            
|                                         |            
|Operating income (loss)                  |            
|                                         |            
|Interest and other income                |            
|Interest expense                         |            
|Loss on disposal of assets               |            
|                                         |            
|(Loss) income from continuing            |            
|operations                               |            
|Discontinued operations, net             |            
|                                         |            
|Net income (loss)                        |            
|                                         |            

# Note 13 
Subsequent Event

On
April 11, 2006, the independent directors of our managing general partner approved NTS
Realtys amended and restated agreement of limited partnership. The amended and
restated agreement became effective as of December 29, 2005.

17

---

# 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

General

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

Impairment
and Valuation

Statement
of Financial Accounting Standards (SFAS) No. 144 Accounting for the
Impairment or Disposal of Long-Lived Assets, specifies circumstances in which
certain long-lived assets must be reviewed for impairment. If this review indicates that
the carrying amount of an asset exceeds the sum of its expected future cash flows, the
assets carrying value must be written down to fair value. In determining the value
of an investment property and whether the investment property is impaired, management
considers several factors such as projected rental and vacancy rates, property operating
expenses, capital expenditures, interest rates and recent appraisals when available. The
capitalization rate used to determine property valuation is based on among others, the
market in which the investment property is located, length of leases, tenant financial
strength, the economy in general, demographics, environment, property location,
visibility, age and physical condition. All of these factors are considered by management
in determining the value of any particular investment property. The value of any
particular investment property is sensitive to the actual results of any of these factors,
either individually or taken as a whole. If the actual results differ from
managements judgment, the valuation could be negatively or positively affected.

Our
property acquisitions were accounted for using the purchase method of accounting in
accordance with SFAS No. 141 Business Combinations. Each propertys
assets and liabilities acquired from unaffiliated third parties was adjusted to reflect
its fair market value. In accordance with SFAS No. 141, we have allocated the purchase
price of each acquired investment property among land, buildings and improvements, other
intangibles, including acquired above market leases, acquired below market leases and
acquired in-place lease origination cost which is the market cost avoidance of executing
the acquired leases. Allocation of the purchase price is an area that requires complex
judgments and significant estimates. We used the information contained in a third-party
appraisal as the primary basis for allocating the purchase price between land and
buildings. A pro rata portion of the purchase price was allocated to the value of avoiding
a lease-up period for acquired in-place leases. The value of in-place leases is amortized
to expense over the remaining initial term of the respective leases. A portion of the
purchase price was allocated to the estimated lease origination cost based on estimated
lease execution costs for similar leases and considered various factors including
geographic location and size of leased space. We then evaluated acquired leases based upon
current market rates at the acquisition date and various other factors including
geographic location, size and the location of leased space within the property, tenant
profile and the credit risk of the tenant in determining whether the acquired lease is
above or below market. After acquired leases were determined to be at, above or below
market, we allocated a pro rata portion of the purchase price to any acquired above or
below market lease based upon the present value of the difference between the contractual
lease rate and the estimated market rate. We also consider an allocation of purchase price
to in-place leases that have a customer relationship intangible value. The characteristics
we consider in allocating these values include the nature and extent of existing business
relationships with the tenant, growth prospects for developing new business with the
tenant and the tenants credit

18

---

quality and expectations of lease renewals. We did not
have any tenants with whom we have identified a developed relationship that we believe had
any intangible value.

Recognition
of Rental Income

Under
GAAP, we are required to recognize rental income based on the effective monthly rent for
each lease. The effective monthly rent is equal to the average monthly rent during the
term of the lease, not the stated rent for any particular month. The process, known as
straight-lining or stepping rent generally has the effect of
increasing rental revenues during the early phases of a lease and decreasing rental
revenues in the latter phases of a lease. Due to the impact of
straight-lining, the cash collected for rent exceeded rental income by
approximately $6,000 for the three months ended March 31, 2006. Rental income exceeded the
cash collected for rent by approximately $288,000, for the three months ended March 31,
2005. If rental income calculated on a straight-line basis exceeds the cash rent due under
the lease, the difference is recorded as an increase in deferred rent receivable and
included as a component of accounts receivable on the relevant balance sheet. If the cash
rent due under the lease exceeds rental income calculated on a straight-line basis, the
difference is recorded as a decrease in deferred rent receivable and is recorded as a
decrease of accounts receivable on the relevant balance sheet. We defer recognition of
contingent rental income, such as percentage or excess rent, until the specified target
that triggers the contingent rental income is achieved. We periodically review the
collectability of outstanding receivables. Allowances are generally taken for tenants with
outstanding balances due for a period greater than ninety days and tenants with
outstanding balances due for a period less than ninety days but that we believe are
potentially uncollectible.

Recognition
of Lease Termination Income

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

Cost
Capitalization and Depreciation Policies

We
review all expenditures and capitalize any item exceeding $2,500 deemed to be an upgrade
or a tenant improvement with an expected useful life greater than one year. Land,
buildings and amenities are stated at cost. Depreciation expense is computed using the
straight-line method over the estimated useful lives of the assets. Buildings and
improvements have estimated useful lives between 7-30 years, land improvements have
estimated useful lives between 5-30 years and amenities have estimated useful lives
between 5-30 years. Acquired above and below market leases are amortized on a
straight-line basis over the life of the related leases as an adjustment to rental income.
Acquired in-place lease origination cost is amortized over the life of the lease as a
component of amortization expense.

# Results of Operations

At
March 31, 2006, we owned thirty-one properties, comprised of nine multifamily properties,
eighteen office and business centers, three retail properties and one ground lease. We
generate substantially all of our operating income from property operations.

Net
income from continuing operations for the three months ended March 31, 2006 was
approximately $47,082,000. Net loss from continuing operations for the three months ended
March 31, 2005 was approximately $(488,000). The change is primarily due to the gain on
the sale of Golf Brook and Sabal Park Apartments of approximately $48.3 million in
February 2006. Rental income increased from the period ended March 31, 2005 to the period
ended March 31, 2006, primarily as a result of the 2006 acquisitions of The Grove at
Richland Apartments, The Grove at Swift Creek Apartments, The Grove at Whitworth
Apartments, Castle Creek Apartments and Lake Clearwater Apartments and the August 2005
acquisition of The Lakes Apartments.

19

---

The
following tables include certain selected summarized operating data for the three months
ended March 31, 2006 and 2005. This data should be read in conjunction with our financial
statements, including the notes attached hereto.

|                                 | (Unaudited)
|-------------------------------- | -----------
|
|
|Total revenues                   |            
|Operating expenses and operating |            
|expenses reimbursed to affiliate |            
|Depreciation and amortization    |            
|Total interest expense           |            
|Net income (loss)                |            

|                                 | (Unaudited)
|-------------------------------- | -----------
|
|
|Total revenues                   |            
|Operating expenses and operating |            
|expenses reimbursed to affiliate |            
|Depreciation and amortization    |            
|Total interest expense           |            
|Net income (loss)                |            

Occupancy
levels at our continuing properties by segment as of March 31, 2006 and 2005 were as
follows:

|            | 2006   | 2005 
|----------- | ------ | -----
|
|Commercial  | 77.3%  | 85.6%
|Multifamily | 94.2%  | 85.0%
|Retail      | 100.0% | 99.5%
|Land        | N/A    | N/A  

We
believe the changes in occupancy on March 31 from year to year are temporary effects of
each propertys specific mix of lease maturities and are not indicative of any known
trend or uncertainty.

The
average occupancy levels at our continuing properties by segment for the three months
ended March 31, 2006 and 2005 were as follows:

|            | 2006   | 2005 
|----------- | ------ | -----
|Commercial  | 77.5%  | 85.6%
|Multifamily | 93.1%  | 84.4%
|Retail      | 100.0% | 99.5%
|Land        | N/A    | N/A  

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

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

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

20

---

The
following discussion relating to changes in our results of operations includes only
material line items within our Statements of Operations or line items for which there was
a material change between the three months ended March 31, 2006 and 2005.

Rental
Income and Tenant Reimbursements

Rental
income and tenant reimbursements from continuing operations for the three months ended
March 31, 2006 and 2005 were approximately $9,333,000 and $7,053,000, respectively. The
increase of $2,280,000, or 32%, was primarily the result of the 2006 acquisitions of The
Grove at Richland Apartments, The Grove at Swift Creek Apartments, The Grove at Whitworth
Apartments, Castle Creek Apartments and Lake Clearwater Apartments and the August 2005
acquisition of The Lakes Apartments.

Operating
Expenses and Operating Expenses Reimbursed to Affiliate

Operating
expenses from continuing operations for the three months ended March 31, 2006 and 2005
were approximately $1,697,000 and $1,459,000, respectively. The increase of $238,000, or
16%, was primarily due to the 2006 acquisitions of The Grove at Richland Apartments, The
Grove at Swift Creek Apartments, The Grove at Whitworth Apartments, Castle Creek
Apartments and Lake Clearwater Apartments and the August 2005 acquisition of The Lakes
Apartments.

Operating
expenses reimbursed to affiliate from continuing operations for the three months ended
March 31, 2006 and 2005 were approximately $1,048,000 and $748,000, respectively. The
increase of $300,000, or 40%, was primarily due to the 2006 acquisitions of The Grove at
Richland Apartments, The Grove at Swift Creek Apartments, The Grove at Whitworth
Apartments, Castle Creek Apartments and Lake Clearwater Apartments and the August 2005
acquisition of The Lakes Apartments.

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

Management
Fees

Management
fees from continuing operations for the three months ended March 31, 2006 and 2005 were
approximately $479,000 and $312,000, respectively. The increase of $167,000, or 54%, was
primarily due to the 2006 acquisitions of The Grove at Richland Apartments, The Grove at
Swift Creek Apartments, The Grove at Whitworth Apartments, Castle Creek Apartments and
Lake Clearwater Apartments and the August 2005 acquisition of The Lakes Apartments.

Pursuant
to our amended and restated management agreement, NTS Development Company receives
property management fees equal to 5% of the gross collected revenue from our properties.
Management fees are calculated as a percentage of cash collections, however, for revenue
reporting purposes 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, 2006
and 2005 were approximately $955,000 and $641,000, respectively. The increase of $314,000,
or 49%, was primarily due to the 2006 acquisitions of The Grove at Richland Apartments,
The Grove at Swift Creek Apartments, The Grove at Whitworth Apartments, Castle Creek
Apartments and Lake Clearwater Apartments and the August 2005 acquisition of The Lakes
Apartments.

21

---

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, 2006 and 2005 were approximately $580,000 and $693,000, respectively. The decrease of
$113,000, or 16%, was primarily due to decreased legal and professional fees in relation
to the merger and the class action litigation. Professional and administrative expenses
for the three months ended March 31, 2006 included approximately $0 and $135,000 in merger
and litigation expenses, respectively. Professional and administrative expenses for the
three months ended March 31, 2005 included approximately $153,000 and $153,000 in merger
and litigation expenses, respectively.

Professional
and administrative expenses reimbursed to affiliate from continuing operations for the
three months ended March 31, 2006 and 2005 were approximately $406,000 and $352,000,
respectively. The increase of $54,000, or 15%, was primarily due to increased personnel
costs.

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

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

|                   | (Unaudited)
|------------------ | -----------
|
|
|Finance            |            
|Accounting         |            
|Investor Relations |            
|Human Resources    |            
|Overhead           |            
|                   |            
|Total              |            
|                   |            

Depreciation
and Amortization

Depreciation
 and  amortization  expense from  continuing  operations for the three months ended March
31, 2006 and 2005 was approximately $2,891,000 and $1,825,000,  respectively.  The
increase of $1,066,000,  or 58%, was primarily due to the 2006  acquisitions of The Grove
at Richland  Apartments,  The Grove at Swift Creek Apartments, The Grove at Whitworth
 Apartments,  Castle Creek  Apartments  and Lake  Clearwater  Apartments and the August
2005 acquisition of The Lakes Apartments.

Interest
and Other Income

Interest
and other income for the three  months  ended March 31, 2006 and 2005 was  approximately
 $94,000 and $41,000,  respectively.  The  increase of $53,000 was  primarily  the result
of a forfeited  deposit due to the cancellation of the sales agreement for the Sears
Office Building.

Interest
Expense

Interest
 expense  from  continuing  operations  for the three  months  ended  March 31, 2006 and
2005 was approximately  $2,522,000  and  $1,642,000,  respectively.  The increase of
$880,000,  or 54%, was primarily due to additional loan proceeds obtained in the third
and fourth quarters of 2005 and the first quarter of 2006.

22

---

Loss
on Disposal of Assets

The
loss on disposal of assets from  continuing  operations  for the three months ended March
31, 2006 and 2005 can be attributed to assets that were not fully  depreciated  at the
time of  replacement,  spread amongst the majority  of  our  properties.  These
 replacements  include  heating  and  air  conditioning  units,  common  area
renovations, stairwell upgrades, access control upgrades, roof replacements, among
others.

Discontinued
Operations

Discontinued
operations,  net for the  three  months  ended  March 31,  2006 and 2005 were
 approximately $59,000 and  $105,000,  respectively.  The decrease of $46,000,  or 44%,
was  primarily due to 2006 only having one month of results because Golf Brook and Sabal
Park Apartments were sold on February 2, 2006.

Gain
on Sale of Discontinued Operations

Gain
on sale of  discontinued  operations  for the  three  months  ended  March  31,  2006
 and  2005  was approximately  $48,271,000  and $0,  respectively.  The  increase  was
due to the sale of Golf Brook and Sabal Park Apartments on February 2, 2006.

# Liquidity and Capital
Resources

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

|                                                | (Unaudited)
|----------------------------------------------- | -----------
|
|
|Operating activities                            |            
|Investing activities                            |            
|Financing activities                            |            
|                                                |            
|Net (decrease) increase in cash and equivalents |            
|                                                |            

Cash
Flow from Operating Activities

Net
cash provided by operating  activities  decreased from approximately  $1,841,000 to
$1,808,000 for the three months ended March 31, 2005 and 2006,  respectively.  The change
was not  significant  and is not  indicative of any known trend or uncertainty.

Cash
Flow from Investing Activities

Net
cash used in investing  activities  increased from  approximately  $3,645,000 to
 $64,996,000  for the three  months  ended  March  31,  2005  and  2006,  respectively.
 The  increase  was  primarily  due to  the  2006 acquisitions  of The Grove at Richland
 Apartments,  The Grove at Swift Creek  Apartments,  The Grove at  Whitworth Apartments,
 Castle Creek  Apartments  and Lake  Clearwater.  The increase is partially  offset by
the sale of Golf Brook and Sabal Park Apartments in February 2006.

Cash
Flow from Financing Activities

Net
cash provided by financing  activities  increased from  approximately  $14,669,000 to
$57,800,000  for the three  months  ended  March 31,  2005 and 2006,  respectively.  The
 change  was  primarily  the result of loan proceeds obtained in 2006 used to fund our
apartment acquisitions.

23

---

Future
Liquidity

Our
future  liquidity  depends  significantly  on our  properties'  occupancy  remaining  at
a level which provides for debt payments and adequate  working  capital,  currently and
in the future.  If occupancy were to fall below that level and remain at or below that
level for a significant  period of time,  our ability to make payments due under our debt
 agreements and to continue paying daily  operational  costs would be greatly  impaired.
 In the next twelve months,  we intend to operate the  properties in a similar  manner to
their  operation in recent years. Cash  reserves  which consist of  unrestricted  cash as
shown on our balance  sheet were  approximately  $21,000 on March 31, 2006.

On
March 20, 2006, NTS Realty announced that the board of directors of its managing  general
partner,  NTS Realty  Capital,  Inc.,  approved a quarterly  distribution of $0.10 per
unit on NTS Realty's  limited  partnership units.  The  distribution  was paid on April
14,  2006,  to limited  partners of record at the close of business on April 17, 2006.

We
expect to incur capital  expenditures  of  approximately  $8.4 million funded by
borrowings on our debt during the next twelve months primarily for roof  replacements and
tenant  origination  costs necessary to continue leasing our  properties.  This
 discussion  of future  liquidity  details our material  commitments.  We anticipate
seeking renewal or refinancing of our notes payable coming due in the next twelve months.

On
April 11,  2006,  pursuant to the terms of the  settlement  agreement  with respect to
the class action litigation  involving the  Partnerships,  the independent  directors of
our managing  general  partner  approved an amended and restated  management  agreement
 with NTS  Development  Company,  an affiliate of NTS Realty's  general partner.  The
 independent  directors  engaged a nationally  recognized  real estate expert to assist
them in their review of the existing  management  agreement.  The amended and restated
 management  agreement became effective as of December 29, 2005. The resulting
 disposition fee of approximately  $715,000,  construction  supervision fees of
approximately  $73,000 and commercial  leasing fees of  approximately  $83,000 may
reasonably be expected to have a significant and material continuing impact on our future
liquidity.

Property
Transactions

On
August 24, 2005, we closed on a $20.0 million line of credit from PNC Bank,  National
 Association.  We used a portion of the proceeds from the line of credit to pay the
purchase price for The Lakes  Apartments  pending permanent  financing.  On March 23,
2006,  the line of credit was  increased  to $24.0  million to assist in future
acquisitions and other working capital needs.

On
August 26, 2005, we purchased The Lakes  Apartments,  located  adjacent to Willow Lake
 Apartments,  in Indianapolis,  Indiana.  The Lakes is a 230-unit  luxury  multifamily
 property which includes  amenities such as a fitness center, car wash, swimming pool and
a lighted tennis court.

On
November 1, 2005,  we  announced  that we entered  into two  agreements  to  purchase
 two  multifamily properties  located in Nashville,  Tennessee and one  multifamily
 property  located in Richmond,  Virginia from an unaffiliated  Delaware  limited
 partnership.  Subject to the terms and conditions of the Agreements,  we agreed to pay
approximately  $117.25 million for the properties.  The properties in Nashville consist
of apartment  complexes with 292 units and 301 units, respectively, while the Richmond
property has 240 units.

On
 February  2,  2006,  we closed  on our  agreements  to sell  Golf  Brook  Apartments
 and  Sabal  Park Apartments,  our multifamily  properties located in Orlando,  Florida,
to an unaffiliated Florida corporation for a purchase price of approximately $71.5
million, resulting in a significant gain.

On
February 3, 2006, we closed on our two  agreements to purchase two  multifamily
 properties  located in Nashville,  Tennessee  and one agreement to purchase a
 multifamily  property in Richmond,  Virginia for a purchase price  totaling
 approximately  $117.2  million (a portion of which was  satisfied by the  assumption of
a mortgage loan with an outstanding  balance of approximately $33.4 million).  The
Tennessee  properties are commonly known as The Grove at Richland and The Grove at
 Whitworth,  while the Virginia  property is commonly  known as The Grove at Swift Creek.

24

---

On
 February  7, 2006,  we  announced  that we entered  into an  agreement  to  purchase
 two  multifamily properties  located in  Indianapolis,  Indiana.  These  properties  are
commonly  known as AMLI at Castle Creek and AMLI at Lake  Clearwater.  Castle Creek has
276 units and Lake  Clearwater has 216 units.  Subject to the terms and conditions of the
agreement, we agreed to pay a purchase price totaling approximately $50.0 million.

On
March 6, 2006,  we announced  that we entered into an agreement to sell  Commonwealth
 Business  Center Phases I and II, two of our business centers located in Jefferson
 County,  Kentucky,  to an unaffiliated  Kentucky limited liability company for $7.1
million.

On
March 23,  2006,  we closed on our  agreement  to purchase the two  multifamily
 properties  located in Indianapolis,  Indiana,  using a bank loan of approximately
 $42.5 million,  guaranteed by the partnership,  and an advance on our line of credit for
the balance.

# Contractual
Obligations and Commercial Commitments

The
following  table  represents our  obligations  and commitments to make future payments as
of March 31, 2006  under  contracts,  such  as debt  and  lease  agreements,  and  under
 contingent  commitments,  such as debt guarantees.

|                                   | Payment Due by Period
|---------------------------------- | ---------------------
|
|Contractual Obligations            |                      
|Mortgages and notes payable        |                      
|Capital lease obligations          |                      
|Operating leases (1)               |                      
|Other long-term obligations (2)    |                      
|                                   |                      
|                                   |                      
|Total contractual cash obligations |                      
|                                   |                      

|(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.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                         | Total |  | Amount of Commitment Expiration Per Period
|---------------------------------------- | ----- |  | ------------------------------------------
|
|Other Commercial Commitments             |       |  |                                           
|Line of credit                           |       |  | $                                         
|Standby letters of credit and guarantees |       |  |                                           
|Other commercial commitments (1)         |       |  |                                           
|                                         |       |  |                                           
|Total commercial commitments             |       |  | $                                         
|                                         |       |  |                                           

|(1) |  | We do not, as a practice, enter into long-term purchase commitments for
               commodities or services. We may from time to time agree to fee for service
               arrangements which are for a term of greater than one year.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Website Information

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

25

---

# 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 $29.8 million at variable rates. We anticipate that a
hypothetical 100 basis point increase in interest rates would result in an approximate
$8.7 million decrease in the fair value of our fixed rate debt while increasing interest
expense on our variable rate debt by approximately $298,000 annually.

# Item 4  Controls
and Procedures

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

Our
managing general partners Chief Executive Officer and Chief Financial Officer have
evaluated our disclosure controls and procedures as of March 31, 2006. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were effective as of March 31, 2006. There were no
changes in our internal controls over financial reporting that materially affected or were
reasonably likely to materially affect our internal control over financial reporting
during the first quarter of 2006.

26

---

# PART II  OTHER
INFORMATION

# Item 1  Legal
Proceedings

On
May 6, 2004, the Superior Court of the State of California for the County of Contra Costa
granted its final approval of the settlement agreement jointly filed by the general
partners (the Former General Partners) of the Partnerships, along with certain
of their affiliates, with the class of plaintiffs in the action originally captioned
Buchanan, et al. v. NTS-Properties Associates, et al. (Case No. C01-05090) (the
California Litigation) on December 5, 2003. At the final hearing, class
members were given the opportunity to object to the final approval of the settlement
agreement, the entry of a final judgment dismissing with prejudice the California
Litigation, or an application of an award for attorneys fees and expenses to
plaintiffs counsel. The Superior Courts order provided, among other things,
that: (1) the settlement agreement, and all transactions contemplated thereby, including
the merger of the Partnerships into us, were fair, reasonable and adequate, and in the
best interests of the class of plaintiffs; (2) the plaintiffs complaint and each and
every cause of action and claim set forth therein is dismissed with prejudice; and (3)
each class member who did not request to be excluded from the settlement released all
known and unknown claims against the defendants, including those claims being pursued in a
competing class action in Kentucky, which is discussed in further detail below.

On
June 11, 2004, several class members who objected to the settlement agreement but whose
objections were overruled by the Superior Court, filed an appeal in the Court of Appeal of
the State of California, First Appellate District. On July 28, 2005, the Court of Appeal
issued its decision affirming the Superior Courts approval of the settlement, and
rejecting the objectors arguments. On October 5, 2005, the Court of Appeal of the
State of California, First Appellate District entered a Remittitur Order stating that the
time for appeal had expired and that the judgment of the Appellate Court was final. This
effectively concludes the litigation. The matter was then sent back to the Superior Court
of the State of California for the County of Contra Costa in order to conduct proceedings
to effectuate the settlement.

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

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

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

On
July 7, 2005, two of the plaintiffs in the Kentucky Litigation voluntarily dismissed their
claims against the defendants. The Former General Partners believe that these dismissals
affect the value and scope of plaintiffs claims. Accordingly, defendants remanded
the hearing on the motion to dismiss originally scheduled for July 15, 2005, in order to
properly advise the Court of the effect of the voluntary dismissals. A hearing on the
motion to dismiss has been rescheduled for September 29, 2006.

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

27

---

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

# Item 1A  Risk
Factors

There
have not been material changes to our Risk Factors as disclosed in our most recent annual
report on Form 10-K as filed with the Securities and Exchange Commission on April 3, 2006.

# Item 2 
Unregistered Sales of Equity Securities and Use of Proceeds

On
November 21, 2005, we announced that Mr. J.D. Nichols, Chairman of NTS Realty Capital,
Inc., our managing general partner, adopted three pre-arranged trading plans to purchase
our limited partnership units pursuant to Rule 10b5-1 under the Securities Exchange Act of
1934, as amended. The plans authorize their administrator, PNC Investment, to purchase our
limited partnership units from time to time, through no later than October 2006, on behalf
of three entities controlled or established by Mr. Nichols. 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 period ended March 31, 2006, the three entities controlled or
established by Mr. Nichols purchased our limited partnership units as follows:

|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 2006  | 23,000                          | $6.12                       | 23,000                                                                          | (1)                                                                                                        
|              |                                 |                             |                                                                                 |                                                                                                            
|February 2006 | 16,800                          | $6.97                       | 16,800                                                                          | (1)                                                                                                        
|              |                                 |                             |                                                                                 |                                                                                                            
|March 2006    | 11,000                          | $8.37                       | 11,000                                                                          | (1)                                                                                                        
|              |                                 |                             |                                                                                 |                                                                                                            
|Total         | 50,800                          | $6.89                       | 50,800                                                                          | (1)                                                                                                        

|(1) |  | A description of the maximum number of units that may be purchased under the
               trading plans is included in the narrative preceding this table.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

Item 3  Defaults
Upon Senior Securities
None.

Item 4  Submission
of Matters to a Vote of Security Holders 
None.

Item 5  Other
Information
None.

# 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)

28

---

|Exhibit No. |                                                                                                                                                                                                                     |    
|----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---
|3.03        | Certificate of Incorporation of NTS Realty Capital, Inc.                                                                                                                                                            | (8)
|            |                                                                                                                                                                                                                     |    
|3.04        | By-Laws of NTS Realty Capital, Inc.                                                                                                                                                                                 | (2)
|            |                                                                                                                                                                                                                     |    
|10.01       | Amended and Restated Management Agreement between NTS Realty Holdings Limited Partnership and
     NTS Development Company, dated as of December 29, 2005                                                           | (6)
|            |                                                                                                                                                                                                                     |    
|10.02       | Form of Lease Agreement between NTS Realty Holdings Limited Partnership and SHPS, Inc.                                                                                                                              | (4)
|            |                                                                                                                                                                                                                     |    
|10.03       | Purchase and Sale Agreement between NTS Realty Holdings Limited Partnership and
     Investors Capital Mortgage Group, Inc., dated September 30, 2005 (Golf Brook Apartments)                                       | (5)
|            |                                                                                                                                                                                                                     |    
|10.04       | Purchase and Sale Agreement between NTS Realty Holdings Limited Partnership and
     Investors Capital Mortgage Group, Inc., dated September 30, 2005 (Sabal Park Apartments)                                       | (5)
|            |                                                                                                                                                                                                                     |    
|10.05       | Agreement for Purchase and Sale between Schaedle Worthington Hyde Properties, L.P. and
     NTS Realty Holdings Limited Partnership, dated November 1, 2005 (The Grove at Richland
     and The Grove at Whitworth) | (5)
|            |                                                                                                                                                                                                                     |    
|10.06       | Agreement for Purchase and Sale between Schaedle Worthington Hyde Properties, L.P. and
     NTS Realty Holdings Limited Partnership, dated November 1, 2005 (The Grove at Swift Creek)                              | (5)
|            |                                                                                                                                                                                                                     |    
|10.07       | Purchase and Sale Agreement between AMLI at Castle Creek, L.P. and AMLI Residential
     Properties, L.P. and NTS Realty Holdings Limited Partnership, dated February 7, 2006 (Castle Creek and Lake Clearwater)    | (5)
|            |                                                                                                                                                                                                                     |    
|10.08       | Unconditional and Continuing Guarantee by NTS Realty Holdings Limited Partnership in favor of
     National City Bank, dated March 23, 2006                                                                         | (5)
|            |                                                                                                                                                                                                                     |    
|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                                                                              | (8)
|            |                                                                                                                                                                                                                     |    
|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                                                                              | (8)
|            |                                                                                                                                                                                                                     |    
|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                                                                         | (8)
|            |                                                                                                                                                                                                                     |    
|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                                                                         | (8)
|            |                                                                                                                                                                                                                     |    
|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)

|    |                                                                                                                                                                                            | 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
|(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) | Filed herewith                                                                                                                                                                             | 

29

---

# SIGNATURES

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

| |  | NTS REALTY HOLDINGS LIMITED PARTNERSHIP
| |  | ---------------------------------------

| |  | By:     NTS REALTY CAPITAL, INC.
           Its:     Managing General Partner
           By:    /s/ Brian F. Lavin
                    
                    Brian F. Lavin
                    Its:     President and Chief Executive Officer
                    Date: May 12, 2006
           By:    /s/ Gregory A. Wells
                    
                    Gregory A. Wells
                    Its:     Chief Financial Officer
                    Date: May 12, 2006
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

30