FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from.........to.........
Commission file number 0-14194
VMS NATIONAL PROPERTIES JOINT VENTURE
(Exact name of registrant as specified in its charter)
Illinois 36-3311347
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, Post Office Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
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
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
VMS NATIONAL RESIDENTIAL PORTFOLIO I
VMS NATIONAL RESIDENTIAL PORTFOLIO II
(Illinois limited partnerships)
VMS NATIONAL PROPERTIES (an Illinois partnership) AND SUBPARTNERSHIPS
COMBINED BALANCE SHEETS
(in thousands)
March 31, December 31,
1999 1998
(Unaudited) (Note)
Assets:
Cash and cash equivalents $ 865 $ 931
Receivables and deposits 1,978 2,163
Restricted escrows 2,646 2,596
Other assets 498 418
Investment properties:
Land 13,404 13,404
Buildings and personal property 133,613 133,223
Less accumulated depreciation (82,246) (80,798)
64,771 65,829
$ 70,758 $ 71,937
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 413 $ 405
Tenant security deposit liabilities 1,084 1,108
Accrued property taxes 914 1,047
Other liabilities 553 493
Accrued interest 972 1,076
Mortgage notes payable 139,178 139,732
Notes payable 38,537 37,458
Deferred gain on extinguishment of debt 42,225 42,225
Partners' Deficit (153,118) (151,607)
$ 70,758 $ 71,937
Note: The balance sheet at December 31, 1998, has been derived from the
audited financial statements at that date but does not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See Accompanying Notes to Combined Financial Statements
b)
VMS NATIONAL RESIDENTIAL PORTFOLIO I
VMS NATIONAL RESIDENTIAL PORTFOLIO II
(Illinois limited partnerships)
VMS NATIONAL PROPERTIES (an Illinois partnership) AND SUBPARTNERSHIPS
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per interest data)
Three Months Ended
March 31,
1999 1998
Revenues:
Rental income $ 6,784 $ 6,458
Other income 272 286
Casualty gain -- 223
Total revenues 7,056 6,967
Expenses:
Operating 2,280 2,426
General and administrative 165 198
Depreciation 1,448 1,391
Interest 4,211 4,099
Property taxes 463 414
Loss on disposal of property -- 77
Total expenses 8,567 8,605
Net loss $(1,511) $(1,638)
Net loss allocated to general partners (2%) $ (30) $ (33)
Net loss allocated to limited partners (98%) (1,481) (1,605)
$(1,511) $(1,638)
Net loss per limited partnership interest:
Portfolio I (644 interests issued and outstanding) $(1,625) $(1,761)
Portfolio II (267 interests issued and outstanding) $(1,626) $(1,764)
See Accompanying Notes to Combined Financial Statements
c)
VMS NATIONAL RESIDENTIAL PORTFOLIO I
VMS NATIONAL RESIDENTIAL PORTFOLIO II
(Illinois limited partnerships)
VMS NATIONAL PROPERTIES (an Illinois partnership) AND SUBPARTNERSHIPS
COMBINED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands)
VMS National Residential Portfolio I
Limited Partners
General Accumulated Subscription
Partners Deficit Notes Total Total
Partners' deficit at
December 31, 1998 $(3,445) $(102,751) $ (506) $(103,257) $(106,702)
Net loss for the three
months ended
March 31, 1999 (21) (1,047) -- (1,047) (1,068)
Partner's deficit at
March 31, 1999 $(3,466) $(103,798) $ (506) $(104,304) $(107,770)
VMS National Residential Portfolio II
Limited Partners
General Accumulated Subscription
Partners Deficit Notes Total Total
Partners' deficit at
December 31, 1998 $(1,442) $ (43,134) $ (329) $ (43,463) $(44,905)
Net loss for the three
months ended
March 31, 1999 (9) (434) -- (434) $ (443)
Partner's deficit at
March 31, 1999 $(1,451) $ (43,568) $ (329) $ (43,897) $(45,348)
Combined total $(4,917) $(147,366) $ (835) $(148,201) $(153,118)
See Accompanying Notes to Combined Financial Statements
d)
VMS NATIONAL RESIDENTIAL PORTFOLIO I
VMS NATIONAL RESIDENTIAL PORTFOLIO II
(Illinois limited partnerships)
VMS NATIONAL PROPERTIES (an Illinois partnership) AND SUBPARTNERSHIPS
COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1999 1998
Cash flows from operating activities:
Net loss $ (1,511) $ (1,638)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 1,448 1,391
Amortization of discounts and loan costs 1,079 971
Loss on disposal of property -- 77
Casualty gain -- (223)
Change in accounts:
Receivables and deposits 185 (29)
Other assets (80) 212
Accounts payable 8 (81)
Tenant security deposit liabilities (24) 7
Accrued property taxes (133) 175
Accrued interest 50 1,079
Other liabilities 60 (636)
Net cash provided by operating activities 1,082 1,305
Cash flows used in investing activities:
Property improvements and replacements (390) (307)
Net deposits to restricted escrows (50) (2,109)
Net cash used in investing activities (440) (2,416)
Cash flows from financing activities:
Payments on mortgage loans payable (708) (277)
Payments received on subscription notes -- 3
Net cash used in financing activities (708) (274)
Net decrease in cash and cash equivalents (66) (1,385)
Cash and cash equivalents at beginning of period 931 2,510
Cash and cash equivalents at end of period $ 865 $ 1,125
Supplemental disclosure of cash flow information:
Cash paid for interest $ 3,083 $ 2,050
Supplemental disclosure of non-cash activity:
Accrued interest added to mortgage notes payable $ 154 $ --
At March 31, 1998, in connection with a fire at Pathfinder Village Apartments,
investment properties, receivables and deposits, and other liabilities were
adjusted $223,000 $304,000 and $304,000, respectively, for non-cash activity.
See Accompanying Notes to Combined Financial Statements
VMS NATIONAL RESIDENTIAL PORTFOLIO I
VMS NATIONAL RESIDENTIAL PORTFOLIO II
(Illinois Limited Partnerships)
VMS NATIONAL PROPERTIES (an Illinois partnership) AND SUBPARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited combined financial statements of VMS National
Properties Joint Venture (the "Venture" or "Registrant") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of MAERIL, Inc. ("MAERIL" or the "Managing General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three months ended March 31, 1999, are not necessarily indicative of the results
that may be expected for the year ending December 31, 1999. For further
information, refer to the combined financial statements and footnotes thereto
included in the Venture's annual report on Form 10-K for the fiscal year ended
December 31, 1998.
Basis of Accounting:
The accompanying combined financial statements include the accounts of VMS
National Residential Portfolio I ("Portfolio I") VMS National Residential
Portfolio II ("Portfolio II"), the Venture and Subpartnerships. Significant
interpartnership accounts and transactions have been eliminated from these
combined financial statements.
NOTE B - TRANSFER OF CONTROL
Pursuant to a series of transactions which closed on October 1, 1998, and
February 26, 1999, Insignia Financial Group, Inc. ("Insignia") and Insignia
Properties Trust merged into Apartment Investment and Management Company, a
publicly traded real estate investment trust ("AIMCO"), with AIMCO being the
surviving corporation (the "Insignia Merger"). As a result, AIMCO acquired 100%
ownership interest in the Managing General Partner. The Managing General
Partner does not believe that this transaction will have a material effect on
the affairs and operations of the Venture.
NOTE C - PETITION FOR RELIEF UNDER CHAPTER 11 AND PLAN OF REORGANIZATION
On February 22, 1991, the Venture filed for Chapter 11 bankruptcy protection in
the United States Bankruptcy court in the Central District of California. The
initial filing included only the residential apartment complexes directly owned
by the Venture (entities included in the filing herein after referred to
collectively as the Debtor) and excluded the 10 Subpartnerships consisting of 10
residential apartment complexes encumbered by financing insured or held by the
Department of Housing and Urban Development ("HUD"), and the investing limited
partnerships Portfolio I and Portfolio II. Due to the partnership agreements
existing between the Venture, Portfolio I and Portfolio II, which provide the
Venture with exclusive rights to the limited partner investor contributions, the
Venture's initial filing was amended to reflect the Venture's right to receive
any excess limited partner investor contributions.
The Venture's Plan was confirmed by the Bankruptcy Court in March 1993 and
became effective on September 30, 1993 (the "Effective Date"). During 1997, the
Plan was modified in order to allow the Venture to refinance the debt
encumbering its properties. The bankruptcy plan was closed by the Bankruptcy
Court on April 29, 1998.
The Primary aspects of the Venture's Plan of Reorganization included the
following:
(a) The Venture retained 17 properties from the existing portfolio (the
"retained properties"), and abandoned title of the remaining properties (the
"non-retained properties") to the Federal Deposit Insurance Corporation (the
"FDIC"). The retained properties consisted of one HUD property and sixteen non-
HUD properties. Two of the seventeen retained properties were sold during the
second quarter of 1996. All of the non-retained properties were foreclosed upon
as of December 31, 1996.
(b) The Venture restructured the existing senior-lien debt obligations on the
retained properties (except for one of the retained properties which had a first
mortgage lien insured by HUD and two of the retained properties which had senior
liens formerly payable to the FDIC, as successor to Beverly Hills Mortgage
Corporation ("BH")) to provide for an interest rate of 8.75% per annum effective
as of the first day of the month of the Effective Date with payments based on a
30 year amortization commencing on the first monthly payment due thereafter with
a maturity of January 15, 2000.
The senior lien collateralized by HUD on one of the retained properties was not
modified, and the senior liens formerly held by the FDIC were modified to accrue
at 9% per annum effective as of the first day of the month of the Effective Date
with monthly payments of interest only made at 7% per annum commencing with the
first monthly payments due thereafter on the FDIC value, as defined in "c"
below.
All of the senior-lien debt was refinanced on December 29, 1997.
(c) As it pertained to the existing BH junior mortgages on the retained
properties, the FDIC reduced its claim on two of the properties to $300,000 per
property evidenced by a non-interest bearing note scheduled to mature January
15, 2000, and left in place liens for the full amount of its claims at the
petition date for all other retained properties. Interest on the former FDIC
loans for these retained properties accrued at 10% per annum on the FDIC value
(total property value per the FDIC's June 1992 valuations less the property's
senior lien indebtedness) commencing as of the first day of the month of the
Effective Date and monthly payments of interest only at 7% per annum on the FDIC
value will commence with the first monthly payment due thereafter.
(The retained property governed by a HUD Regulatory Agreement made payments of
interest only following the approval by HUD of the Surplus Cash calculation.)
On October 28, 1995, the FDIC sold all of the debt it held related to the
retained properties to BlackRock Capital Finance, L.P. The debt amounts and
terms were not modified. On December 29, 1997, all of the junior mortgages were
refinanced.
(d) The Venture distributed the following amounts in conjunction with the terms
of the Plan: (1) approximately $5,980,000 to satisfy unsecured prepetition
creditor claims of the nonaffiliated note payable to Security Pacific National
Bank, trade creditors, and property taxes on the retained properties; (2)
approximately $1,056,000 to provide for allowed and unclassified administrative
claims; and (3) approximately $5,960,000 to make capital improvements at the
retained properties. This capital improvement reserve was exhausted during 1995.
(e) The VMS/Stout Joint Venture (the "VMS/Stout Venture") was formed pursuant to
an agreement dated August 18, 1984, which was amended and restated on October 4,
1984. VMS Realty Partners has a 50% interest and affiliates of the Seller (as
defined below) have a 50% interest in the VMS/Stout Venture. The VMS/Stout
Venture, the J.D. Stout Company ("Stout") and certain affiliates of Stout
entered into a contract of sale dated August 18, 1984, which was amended on
October 4, 1984. The contract provided for the sale by Stout and other owners
(collectively the "Seller") of the 51 residential apartment complexes to the
VMS/Stout Venture. The VMS/Stout Venture assigned its interest as purchaser to
the Venture. During 1987, Stout assigned its interest in the VMS/Stout Joint
Venture to ContiTrade Service Corporation ("ContiTrade"). On November 17, 1993,
VMS Realty Partners assigned its interest in the VMS/Stout Joint Venture to the
Partners Liquidating Trust. The VMS/Stout Joint Venture was granted an allowed
claim in the amount of $49,535,000 for the Assignment and Long-Term Loan
Arrangement Notes payable to them by the Venture. Payments totaling $3,475,000
in conjunction with this allowed claim were made to the nonaffiliated members of
the VMS/Stout Joint Venture on October 7, 1993. The Venture also executed a
$4,000,000 promissory note dated September 1, 1993, to ContiTrade Services
Corporation (the "ContiTrade Note") in connection with these allowed note
claims. The ContiTrade Note represents a prioritization of payments to
ContiTrade of the first $4,000,000 in repayments made under the existing
Assignment and Long-Term Loan Arrangement Notes payable to the VMS/Stout Joint
Venture, and does not represent an additional $4,000,000 claim payable to
ContiTrade. In addition to prioritizing ContiTrade's receipt of the first
$4,000,000 of repayments on the old notes, the ContiTrade Note provides for 5%
non-compounding interest on the outstanding principal balance calculated daily
on the basis of a 360 day year. The ContiTrade Note was secured by a Deed of
Trust, Assignment of Rents and Security Agreement on each of the Venture's
retained properties, and provided ContiTrade with other approval rights as to
the ongoing operations of the Venture's retained properties. The ContiTrade
Note, which was scheduled to mature January 15, 2000, was paid off on December
29, 1997.
(f) The Venture entered into a Revised Restructured Amended and Restated Asset
Management Agreement (the "Revised Asset Management Agreement") with Insignia.
Effective October 1, 1993, Insignia took over the asset management of the
Venture's retained properties and partnership functions for the Venture. The
Revised Asset Management Agreement provided for an annual compensation of
$500,000 to be paid to Insignia in equal monthly installments. In addition,
Insignia received reimbursement for all accountable expenses incurred in
connection with their services up to $200,000 per calendar year. These amounts
are to be paid from the available operating cash flow of the Venture's retained
complexes after the payment of operating expenses and priority reserve funding
for insurance, real estate and personal property taxes and senior and junior
mortgage payments. If insufficient operating cash flow exists after the funding
of these items, the balance of asset management fees and reimbursements may be
paid from available partnership cash sources. Additionally, the asset
management fee payable will be reduced proportionately for each of the Venture's
retained complexes which are sold or otherwise disposed of from time to time.
Accordingly, the fee was reduced upon the disposition of Bellevue and Carlisle
Square in 1996. Effective January 1, 1998, in relation to the refinancing of the
senior-lien debt on December 29, 1997 (see "Note D"), the Venture and Managing
General Partner agreed to amend the Asset Management Agreement to reduce the
annual asset management fee payable to $300,000 per year and to reduce the
annual reimbursement for accountable expenses to $100,000.
NOTE D - TRANSACTIONS WITH AFFILIATED PARTIES
The Venture has no employees and is dependent on the Managing General Partner
and its affiliates for the management and administration of all partnership
activities. The Revised Asset Management Agreement, which was executed in
conjunction with the Venture's Plan, provided for (i) certain payments to
affiliates for real estate advisory services and asset management of the
Venture's retained properties for an annual compensation of $500,000 and (ii)
reimbursement of certain expenses incurred by affiliates on behalf of the
Venture up to $200,000 per annum. Effective January 1, 1998, in relation to the
refinancing of the senior-lien debt on December 29, 1997 the Venture and
Managing General Partner agreed to amend the Asset Management Agreement to
reduce the annual asset management fee payable to $300,000 per year and to
reduce the annual reimbursement for accountable expenses to $100,000.
Included in investment properties and operating expenses are construction
oversight reimbursements, paid to an affiliate of the Managing General Partner,
of approximately $2,000 for the three months ended March 31, 1998. There were
no construction oversight reimbursements paid for the three months ended March
31, 1999.
Asset management fees of approximately $70,000 and $91,000 were paid to an
affiliate of the Managing General Partner for the three months ended March 31,
1999 and 1998, respectively.
Affiliates of the Managing General Partner are entitled to receive a percentage
of the gross receipts from all of the Registrant's properties as compensation
for providing property management services. The Registrant paid to such
affiliates approximately $286,000 and $281,000 for the three months ended March
31, 1999 and 1998, respectively.
In addition, affiliates of the Managing General Partner received reimbursement
of accountable administrative expenses amounting to approximately $23,000 and
$32,000 for the three months ended March 31, 1999 and 1998, respectively. These
expenses are included in general and administrative expenses.
An affiliate of the Managing General Partner received bookkeeping reimbursements
in the amount of approximately $36,000 and $38,000 for the three months ended
March 31, 1999 and 1998, respectively. These expenses are included in general
and administrative expenses.
In connection with the Venture's Plan, the court approved the payment of certain
fees and expense reimbursements due to the former managing general partner
relating to the prepetition period. An unpaid balance of approximately $397,000
in management fees owing to the former managing general partner was assigned to
MF VMS, L.L.C., the note holder for the senior and junior notes. This balance
was paid during 1998.
Prepetition property management fees were approved by the Bankruptcy Court for
payment to a former affiliate. This allowed claim may be paid only from
available partnership cash. At March 31, 1999 and 1998, the outstanding balance
of $79,000 is included in other liabilities.
Certain affiliates of the former general partners and the VMS/Stout Venture may
be entitled to receive various fees upon disposition of the properties. These
fees will be paid from the disposition proceeds and are subordinated to the
distributions required by the Plan. There were no property dispositions for
which proceeds were received during the three months ended March 31, 1999 and
1998.
NOTE E _ SEGMENT REPORTING
Description of the types of products and services from which reportable segment
derives its revenues:
The Venture has one reportable segment: residential properties. The Venture's
residential property segment consists of fifteen apartment complexes located in
California, Oregon, Texas, Indiana, Louisiana, Maryland, Nebraska, Arkansas, and
Arizona. The Venture rents apartment units to tenants for terms that are
typically twelve months or less.
Measurement of segment profit or loss:
The Venture evaluates performance based on net income. The accounting policies
of the reportable segment are the same as those described in the summary of
significant accounting policies in the Venture's annual report on Form 10-K for
the year ended December 31, 1998.
Factor's management used to identify the enterprise's reportable segment:
The Venture's reportable segment consists of investment properties that offer
similar products and services. Although each of the investment properties is
managed separately, they have been aggregated into one segment as they provide
services with similar types of products and customers.
Segment information for the three months ended March 31, 1999 and 1998 is shown
in the tables below (in thousands). The 'Other' column includes Venture
administration related items and income and expense not allocated to the
reportable segment.
1999
Residential Other Totals
Rental income $ 6,784 $ -- $ 6,784
Other income 267 5 272
Interest expense 3,132 1,079 4,211
Depreciation 1,448 -- 1,448
General and administrative expense -- 165 165
Segment loss (272) (1,239) (1,511)
Total assets 70,232 526 70,758
Capital expenditures 390 -- 390
1998
Residential Other Totals
Rental income $ 6,458 $ -- $ 6,458
Other income 273 13 286
Interest expense 3,128 971 4,099
Depreciation 1,391 -- 1,391
General and administrative expense -- 198 198
Casualty gain 223 -- 223
Loss on disposal of property 77 -- 77
Segment loss (482) (1,156) (1,638)
Total assets 72,496 952 73,448
Capital expenditures 530 -- 530
NOTE F - LEGAL PROCEEDINGS
The Venture is not aware of any pending or outstanding litigation that is not of
a routine nature arising in the ordinary course of business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The matters discussed in this Form 10-Q contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-Q and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time.
The discussion of the Registrant's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Registrant's business and results of
operation. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
Average occupancy rates for the three months ended March 31, 1999 and 1998, for
all of the Venture's properties are as follows:
Average Occupancy
Property 1999 1998
Buena Vista Apartments
Pasadena, CA 99% 99%
Casa de Monterey
Norwalk, CA 99% 93%
Crosswood Park
Citrus Heights, CA 96% 97%
Mountain View Apartments
San Dimas, CA 99% 96%
Pathfinder
Fremont, CA 88% 92%
Scotchollow
San Mateo, CA 92% 93%
The Bluffs
Milwaukie, OR 95% 97%
Vista Village Apartments
El Paso, TX 95% 92%
Chapelle Le Grande
Merrillville, IN 93% 94%
North Park Apartments
Evansville, IN 93% 96%
Shadowood Apartments
Monroe, LA 96% 94%
The Towers of Westchester Park
College Park, MD 99% 95%
Terrace Gardens
Omaha, NE 95% 99%
Watergate Apartments
Little Rock, AR 91% 94%
Forest Ridge Apartments
Flagstaff, AZ 90% 93%
The Managing General Partner attributes the occupancy fluctuations at the
properties to the following: an increase at Casa de Monterey due to an
improvement in the curb appeal and cosmetics of the property in addition to
improved market conditions; increase at Mountain View Apartments due to strong
market conditions; decrease at Pathfinder due to a fire which caused damages to
one entire building early in 1998. The units were placed back into service late
in 1998 upon completion of the necessary repairs. However, it took several
months before occupancy returned to its previous levels. Occupancy at the
property has improved since the end of its first quarter in 1999. The increase
at Vista Village Apartments is due to more aggressive marketing efforts;
decrease at North Park Apartments due to two newly constructed properties in the
area; increase at The Towers of Westchester Park due to a stronger rental market
and more aggressive marketing; decrease at Terrace Gardens due to an above
normal occupancy for the three months ended March 31, 1998. The average for the
three months ended March 31, 1999 is equal to the average occupancy for the
calendar year 1998. The decrease at Watergate Apartments was due to soft market
conditions and increased competition from new construction; and a decrease at
Forest Ridge Apartments due to an increase in new construction of low income
housing developments and new apartment buildings in the area.
Results from Operations
The Venture recorded a net loss for the three months ended March 31, 1999 of
approximately $1,511,000 as compared to a net loss of approximately $1,638,000
for the three months ended March 31, 1998. The decrease in net loss is
attributable to an increase in total revenues and a decrease in total expenses.
The increase in total revenues is due to an increase in rental income which is
partially offset by the recording of a casualty gain for the three months ended
March 31, 1998. Rental income increased mainly due to an increase in average
annual rental rates at all fifteen of the Venture's investment properties along
with occupancy increases at five of the properties which more than offset the
occupancy decreases at nine of the properties. A casualty gain of $223,000 was
recorded during the three months ended March 31, 1998 in connection with a fire
that damaged eight of the 246 units at Pathfinder Village.
Total expenses decreased primarily due to a reduction in operating and, to a
lesser extent, general and administrative expenses and the recording of a loss
on disposal of property during the three months ended March 31, 1998, which more
than offset the increase in depreciation, interest and property tax expense.
Operating expenses decreased primarily due to a decrease in hazard insurance
expense at all of the Venture's investment properties as a result of a change in
insurance carriers. Additionally, utilities decreased at Forest Ridge,
Scotchollow, Pathfinder Village, Casa De Monterey and Watergate. Operating
expense also decreased as a result of the completion of the following projects
during the three months ended March 31, 1998: exterior painting at Buena Vista,
Mountain View and Casa De Monterey; interior building improvements at Pathfinder
Village, Watergate, Vista Village and Towers at Westchester, and exterior
building improvements at Crosswood Park. Offsetting the reduction in operating
expenses were increases in salary and related costs at Scotchollow, Buena Vista
Apartments, Casa de Monterey, and Shadowood Apartments. The decrease in general
and administrative expenses is primarily due to a decrease in asset management
fees and reimbursements. Effective January 1, 1998, the Asset Management
Agreement was amended to reduce the dollar amounts that could be paid for both
asset management fees and reimbursements. The fees for the first three months
of 1998 were based upon the prior allowed higher amounts. Adjustments were made
subsequent to March 31, 1998 to adjust the 1998 expenses to revised allowable
amounts. The loss on disposal of property for the three months ended March 31,
1998 resulted from the write-off of roofs that were not fully depreciated at the
time of roof replacement projects at Chapelle Le Grande and Mountain View
Apartments. No such loss was recorded during the three months ended March 31,
1999. Interest expense increased primarily due to an increase in the
amortization of debt discounts. The increase in property taxes is primarily the
result of a reduction in the 1998 tax expense due to a refund of Crosswood
Park's 1996 property taxes received during the first quarter of 1998. In
addition, property taxes at North Park Apartments, Chapelle Le Grande and Vista
Village Apartments increased due to the timing of the receipt of property tax
bills in 1999 and 1998 which affected the accruals as of March 31, 1999 and
1998. Depreciation expense increased as the result of depreciation taken on
property improvements and replacements placed into service for the final three
quarters of 1998 and the first quarter of 1999.
Included in general and administrative expenses at both March 31, 1999 and 1998
are reimbursements to the Managing General Partner allowed under the Partnership
Agreement associated with its management of the Venture. Costs associated with
the quarterly and annual communications with investors and regulatory agencies
and the annual audit required by the Partnership Agreement are also included.
As part of the ongoing business plan of the Venture, the Managing General
Partner monitors the rental market environment of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Venture from increases in expense. As part of this
plan, the Managing General Partner attempts to protect the Venture from the
burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At March 31, 1999, the Venture had cash and cash equivalents of approximately
$865,000 as compared to approximately $1,125,000 at March 31, 1998. Cash and
cash equivalents decreased approximately $66,000 for the three months ended
March 31, 1999, from the Registrant's fiscal year end and is the result of
approximately $708,000 of cash used in financing activities and approximately
$440,000 of cash used in investing activities, which is partially offset by
approximately $1,082,000 of cash provided by operating activities. Cash used in
financing activities consisted of payments of principal made on the mortgages
encumbering the Venture's properties. Cash used in investing activities
consisted primarily of property improvements and replacements and, to a lesser
extent, net deposits to escrow accounts maintained by the mortgage lender. The
Venture invests its working capital reserves in a money market account.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Venture and to comply with Federal,
state, and local legal and regulatory requirements. Capital improvements
planned for each of the Registrant's properties are detailed below.
North Park Apartments:
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the Managing General
Partner on interior improvements, it is estimated that North Park Apartments
requires approximately $129,000 of capital improvements over the near term. The
Venture has budgeted capital improvements of approximately $85,000 for 1999 at
this property consisting primarily of electrical upgrades, balconies and
driveway and parking lot repairs. As of March 31, 1999, approximately $12,000
has been incurred consisting primarily of flooring replacements.
Chapelle Le Grande Apartments:
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the Managing General
Partner on interior improvements, it is estimated that Chapelle Le Grande
Apartments requires approximately $122,000 of capital improvements over the near
term. The Venture has budgeted capital improvements of approximately $32,000
for 1999 at this property consisting primarily of roofing,
siding/trim/facia/soffits, driveway and parking lot repairs, landscaping and
irrigation. As of March 31, 1999, approximately $5,000 has been incurred
consisting primarily of appliance and flooring replacements.
Terrace Garden Townhouses:
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the Managing General
Partner on interior improvements, it is estimated that Terrace Garden Townhouses
requires approximately $370,000 of capital improvements over the near term. The
Venture has budgeted capital improvements of approximately $38,000 for 1999 at
this property consisting primarily of roofing, gutters and downspouts, HVAC,
siding/trim/facia/soffits, exterior painting, balconies, driveway and parking
lot repairs, landscaping and irrigation. As of March 31, 1999, approximately
$10,000 has been incurred consisting primarily of appliance and flooring
replacements.
Forest Ridge Apartments:
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the Managing General
Partner on interior improvements, it is estimated that Forest Ridge Apartments
requires approximately $284,000 of capital improvements over the near term. The
Venture has budgeted capital improvements of approximately $83,000 for 1999 at
this property consisting primarily of gutters and downspouts, exterior painting,
driveway and parking lot repairs, exterior lighting, and landscaping and
irrigation. As of March 31, 1999, approximately $17,000 has been incurred
consisting primarily of building renovations, heating upgrades, appliance and
flooring replacements.
Scotchollow Apartments:
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the Managing General
Partner on interior improvements, it is estimated that Scotchollow Apartments
requires approximately $382,000 of capital improvements over the near term. The
Venture has budgeted capital improvements of approximately $125,000 for 1999 at
this property consisting primarily of balconies, driveway and parking lot
repairs, exterior lighting, landscaping and irrigation, and termite protection.
As of March 31, 1999, approximately $70,000 has been incurred consisting
primarily of balcony, driveway and parking lot repairs, a roofing project,
lighting, appliance and flooring replacements and golf cart purchases.
Pathfinder Village Apartments:
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the Managing General
Partner on interior improvements, it is estimated that Pathfinder Village
Apartments requires approximately $591,000 of capital improvements over the near
term. The Venture has budgeted capital improvements of approximately $74,000
for 1999 at this property consisting primarily of roofing, electrical upgrades,
siding/trim/facia/soffits, exterior painting, stairwells, balconies, driveway
and parking lot repairs, landscaping and irrigation, and termite protection. As
of March 31, 1999, approximately $64,000 has been incurred consisting primarily
of balcony repairs, building improvements, and appliance and flooring
replacements. In addition to such near term capital expenditures, the Managing
General Partner has recently identified a severe termite infestation on this
property that will cost an estimated $150,000 to correct. As more fully
discussed below, the Venture is negotiating a remediation plan (the "Termite
Remediation") to enable such treatment to be made as expeditiously as possible.
Buena Vista Apartments:
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the Managing General
Partner on interior improvements, it is estimated that Buena Vista Apartments
requires approximately $102,000 of capital improvements over the near term. The
Venture has budgeted capital improvements of approximately $28,000 for 1999 at
this property consisting primarily of carpet and vinyl replacements and swimming
pool repairs. As of March 31, 1999, approximately $5,000 has been incurred
consisting primarily of swimming pool repairs and flooring replacements.
Mountain View Apartments:
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the Managing General
Partner on interior improvements, it is estimated that Mountain View Apartments
requires approximately $149,000 of capital improvements over the near term. The
Venture has budgeted capital improvements of approximately $50,000 for 1999 at
this property consisting primarily of carpet and vinyl replacements, land
improvements and outdoor furniture. As of March 31, 1999, approximately $5,000
has been incurred consisting of appliance and flooring replacements.
Crosswood Park Apartments:
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the Managing General
Partner on interior improvements, it is estimated that Crosswood Park Apartments
requires approximately $129,000 of capital improvements over the near term. The
Venture has budgeted capital improvements of approximately $54,000 for 1999 at
this property consisting primarily of siding/trim/soffits, exterior painting,
stairwells, and balconies. As of March 31, 1999, approximately $30,000 has been
incurred consisting of balcony repairs, building improvements, appliance and
flooring replacements and heating upgrades.
Casa De Monterey Apartments:
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the Managing General
Partner on interior improvements, it is estimated that Casa De Monterey
Apartments requires approximately $106,000 of capital improvements over the near
term. The Venture has budgeted capital improvements of approximately $43,000
for 1999 at this property consisting primarily of carpet and vinyl replacements.
As of March 31, 1999, approximately $37,000 has been incurred consisting of land
and building improvements, water heater and plumbing repairs, appliance,
cabinets/countertops and flooring replacements.
The Bluffs Apartments:
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the Managing General
Partner on interior improvements, it is estimated that The Bluffs Apartments
requires approximately $75,000 of capital improvements over the near term. The
Venture has budgeted capital improvements of approximately $41,000 for 1999 at
this property consisting primarily of carpet and vinyl replacements, parking lot
repairs, building improvements and signage. As of March 31, 1999, the property
has just commenced its capital improvements with approximately $1,000 being
incurred, consisting of appliance and water heater replacements.
Watergate Apartments:
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the Managing General
Partner on interior improvements, it is estimated that Watergate Apartments
requires approximately $211,000 of capital improvements over the near term. The
Venture has budgeted capital improvements of approximately $42,000 for 1999 at
this property consisting primarily of roofing, electrical upgrades, landscaping
and irrigation. As of March 31, 1999, approximately $13,000 has been incurred
consisting of flooring replacements.
Shadowood Apartments:
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the Managing General
Partner on interior improvements, it is estimated that Shadowood Apartments
requires approximately $435,000 of capital improvements over the near term. The
Venture has budgeted capital improvements of approximately $36,000 for 1999 at
this property consisting primarily of gutters and downspouts, HVAC,
siding/trim/facia/soffits, exterior painting, balconies, driveway and parking
lot repairs, landscaping and irrigation, fences, and pool repairs. As of March
31, 1999, approximately $10,000 has been incurred consisting of air
conditioning, and HVAC upgrades and light fixtures and appliance replacements.
Vista Village Apartments:
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the Managing General
Partner on interior improvements, it is estimated that Vista Village Apartments
requires approximately $326,000 of capital improvements over the near term. The
Venture has budgeted capital improvements of approximately $66,000 for 1999 at
this property consisting primarily of roofing, HVAC, electrical upgrades,
driveway and parking lot repairs, exterior lighting, landscaping and irrigation,
termite protection, and life support systems. As of March 31, 1999,
approximately $25,000 has been incurred consisting of sewer replacement, drapery
purchases and water heater, appliance and flooring replacement.
Tower of Westchester Apartments:
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the Managing General
Partner on interior improvements, it is estimated that Tower of Westchester
Apartments requires approximately $681,000 of capital improvements over the near
term. The Venture has budgeted capital improvements of approximately $91,000
for 1999 at this property consisting primarily of carpet replacements, cabinet
replacements and appliance replacements. As of March 31, 1999, approximately
$86,000 has been incurred consisting of balcony replacements, handicap
accessible renovations, lighting upgrades, and building improvements, appliance
and flooring replacement. Of these near term capital expenditures, the Managing
General Partner believes that the balconies on this property require prompt
remedial work that will cost an estimated $700,000. As more fully discussed
below, the Venture is negotiating a remediation plan (the "Balcony
Remediation") to enable such repairs to be made as expeditiously as possible.
Budgeted capital improvements which total approximately $888,000 for the Venture
are expected to be funded from each of the property's replacement reserves. In
conjunction with the December, 1997 refinancing of the mortgages encumbering all
of the properties, the second mortgage note holder limits the funding of capital
improvements to $300.00 per unit per annum. As a result, the capital
improvement budgets for each of the Venture's properties have been prepared in
accordance with the maximum limits permitted by the second mortgage notes. Any
additional capital improvements planned for 1999 at the Venture's properties
will be made only to the extent of cash available from operations and Venture
reserves.
The Registrant's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Registrant. The Registrant's
senior loans encumbering all of its properties total approximately $108,652,000
and are being amortized over 25 years, with a balloon payment of $91,352,000 due
January 2008. The Registrant's junior loans, which also mature January 2008,
total approximately $30,526,000 and require monthly payments based upon monthly
excess cash flow for each property. The Managing General Partner may attempt to
refinance such indebtedness and/or sell the properties prior to such maturity
date. If the properties cannot be refinanced or sold for a sufficient amount,
the Venture will risk losing such properties through foreclosure.
Capital expenditures of $1,749,286 in excess of the amounts budgeted under the
terms of the Senior Loans and the Junior Loans were made with respect to the
Properties during 1998. The Managing General Partner believes that the owners
of the Senior Loans and the Junior Loans at the time such capital expenditures
were made informed of, and orally consented to, such capital expenditures and
the payment therefore out of cash flows that otherwise would have been used to
pay debt service on the Junior Loans. The use of these cash flows are these
purposes has not caused any deliquencies in the payment of principal, interest,
or other charges on the Senior Loans. In addition, certain scheduled capital
expenditures were not made on a timely basis in compliance with the terms of the
Senior Loans and the Junior Loans.
The Venture currently is negotiating documentation relating to such prior
unscheduled capital expenditures, such deliquent capital expenditures and
remedial plans for the Termite Remediation and the Balcony Remediation (with the
intent that such plans would be paid for out of cash flow that otherwise would
be utilized to pay debt service on the Junior Loans), with the current owner
of the Junior Loans and the servicer for the Senior Loans. The Venture and the
owner of the Junior Loans have agreed in principle upon documentation relating
to such prior unscheduled capital expenditures and deliqent capital
expenditures, which included lender estoppels, a complete release of the
Venture, consent of the owners of the Senior Loans and the servicer for the same
for capital expenditures in excess of current limits, and placement of a
lockbox on the properties. Despite such agreement in principle, however, there
can be no assurance that all of the parties will reach agreement with respect to
such documentation or such remedial plans, or the effect that any such
documentation or remedial plans will have upon the operation of Towers of
Westchester and Pathfinder Village, the operations of the Venture, or the
amortization of the Junior Debt. In addition, the Managing General Partner
believes that the current limitations on capital expenditures with respect to
the properties are unrealistic, given the age and state of repair of the
properties. There can be no assurance that the owners of the Senior Loans or
the Junior Loans will approve any increase in such capital expenditues at any
time, or that the properties owned by the Venture will be maintained in the
future in an acceptable or marketable state of repair.
There were no cash distributions to the partners of either of the Partnerships
for the three months ended March 31, 1999 and 1998. In accordance with the
respective Agreements of Limited Partnership, there are no material restrictions
on the Partnerships' ability to make cash distributions; future cash
distributions are, however, subject to the order of distributions as stipulated
by the Venture's Plan of Reorganization. The source of future distributions will
depend upon the levels of net cash generated from operations, the availability
of cash reserves, and the timing of debt maturities, refinancings and/or
property sales. The Partnerships' distribution policy will be reviewed on a
quarterly basis. There can be no assurance, however, that the Partnerships will
generate sufficient funds from operations, after required capital expenditures
and the order of distributions as stipulated by the Venture's Plan of
Reorganization, to permit any distributions to partners in 1999 or subsequent
periods.
Year 2000 Compliance
General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Venture is
dependent upon the Managing General Partner and its affiliates for management
and administrative services ("Managing Agent"). Any of the computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
Over the past two years, the Managing Agent has determined that it will be
required to modify or replace significant portions of its software and certain
hardware so that those systems will properly utilize dates beyond December 31,
1999. The Managing Agent presently believes that with modifications or
replacements of existing software and certain hardware, the Year 2000 issue can
be mitigated. However, if such modifications and replacements are not made, or
not completed in time, the Year 2000 issue could have a material impact on the
operations of the Venture.
The Managing Agent's plan to resolve Year 2000 issues involves four phases:
assessment, remediation, testing, and implementation. To date, the Managing
Agent has fully completed its assessment of all the information systems that
could be significantly affected by the Year 2000, and has begun the remediation,
testing and implementation phases on both hardware and software systems.
Assessments are continuing in regards to embedded systems. The status of each
is detailed below.
Status of Progress in Becoming Year 2000 Compliant, Including Timetable for
Completion of Each Remaining Phase
Computer Hardware:
During 1997 and 1998, the Managing Agent identified all of the computer systems
at risk and formulated a plan to repair or replace each of the affected systems.
In August 1998, the mainframe system used by the Managing Agent became fully
functional. In addition to the mainframe, PC-based network servers, routers and
desktop PCs were analyzed for compliance. The Managing Agent has begun to
replace each of the non-compliant network connections and desktop PCs and, as of
March 31, 1999, had completed approximately 75% of this effort.
The total cost to the Managing Agent to replace the PC-based network servers,
routers and desktop PCs is expected to be approximately $1.5 million of which
$1.3 million has been incurred to date. The remaining network connections and
desktop PCs are expected to be upgraded to Year 2000 compliant systems by July
31, 1999.
Computer Software:
The Managing Agent utilizes a combination of off-the-shelf, commercially
available software programs as well as custom-written programs that are designed
to fit specific needs. Both of these types of programs were studied, and
implementation plans written and executed with the intent of repairing or
replacing any non-compliant software programs.
During 1998, the Managing Agent began converting the existing property
management and rent collection systems to its management properties Year 2000
compliant systems. The estimated additional costs to convert such systems at
all properties, is $200,000, and the implementation and the testing process is
expected to be completed by July 31, 1999.
The final software area is the office software and server operating systems.
The Managing Agent has upgraded all non-compliant office software systems on
each PC and has upgraded 80% of the server operating systems. The remaining
server operating systems are planned to be upgraded to be Year 2000 compliant by
July 31, 1999.
Operating Equipment:
The Managing Agent has operating equipment, primarily at the property sites,
which needed to be evaluated for Year 2000 compliance. In September 1997, the
Managing Agent began taking a census and inventory of embedded systems
(including those devices that use time to control systems and machines at
specific properties, for example elevators, heating, ventilating, and air
conditioning systems, security and alarm systems, etc.).
The Managing Agent has chosen to focus its attention mainly upon security
systems, elevators, heating, ventilating and air conditioning systems, telephone
systems and switches, and sprinkler systems. While this area is the most
difficult to fully research adequately, management has not yet found any major
non-compliance issues that put the Managing Agent at risk financially or
operationally. The Managing Agent intends to have a third-party conduct an
audit of these systems and report their findings by July 31, 1999.
Any of the above operating equipment that has been found to be non-compliant to
date has been replaced or repaired. To date, these have consisted only of
security systems and phone systems. As of March 31, 1999 the Managing Agent has
evaluated approximately 86% of the operating equipment for the Year 2000
compliance.
The total cost incurred for all properties managed by the Managing Agent as of
March 31, 1999 to replace or repair the operating equipment was approximately
$400,000. The Managing Agent estimates the cost to replace or repair any
remaining operating equipment is approximately $325,000, which is expected to be
completed by August 30, 1999.
The Managing Agent continues to have "awareness campaigns" throughout the
organization designed to raise awareness and report any possible compliance
issues regarding operating equipment within its enterprise.
Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000
The Managing Agent continues to conduct surveys of its banking and other vendor
relationships to assess risks regarding their Year 2000 readiness. The Managing
Agent has banking relationships with three major financial institutions, all of
which have indicated their compliance efforts will be complete before May 1999.
The Managing Agent has updated data transmission standards with two of the three
financial institutions. The Managing Agent's contingency plan in this regard is
to move accounts from any institution that cannot be certified Year 2000
compliant by June 1, 1999.
The Venture does not rely heavily on any single vendor for goods and services,
and does not have significant suppliers and subcontractors who share information
systems (external agent). To date the Venture is not aware of any external
agent with a Year 2000 compliance issue that would materially impact the
Venture's results of operations, liquidity, or capital resources. However, the
Venture has no means of ensuring that external agents will be Year 2000
compliant.
The Managing Agent does not believe that the inability of external agents to
complete their Year 2000 remediation process in a timely manner will have a
material impact on the financial position or results of operations of the
Venture. However, the effect of non-compliance by external agents is not
readily determinable.
Costs to Address Year 2000
The total cost of the Year 2000 project to the Managing Agent is estimated at
$3.5 million and is being funded from operating cash flows. To date, the
Managing Agent has incurred approximately $2.8 million ($0.6 million expensed
and $2.2 million capitalized for new systems and equipment) related to all
phases of the Year 2000 project. Of the total remaining project costs,
approximately $0.5 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred.
The Venture's portion of these costs are not material.
Risks Associated with the Year 2000
The Managing Agent believes it has an effective program in place to resolve the
Year 2000 issue in a timely manner. As noted above, the Managing Agent has not
yet completed all necessary phases of the Year 2000 program. In the event that
the Managing Agent does not complete any additional phases, certain worst case
scenarios could occur. The worst case scenarios could include elevators,
security and heating, ventilating and air conditioning systems that read
incorrect dates and operate with incorrect schedules (e.g., elevators will
operate on Monday as if it were Sunday). Although such a change would be
annoying to residents, it is not business critical.
In addition, disruptions in the economy generally resulting from Year 2000
issues could also adversely affect the Venture. The Venture could be subject to
litigation for, among other things, computer system failures, equipment
shutdowns or failure to properly date business records. The amount of potential
liability and lost revenue cannot be reasonably estimated at this time.
Contingency Plans Associated with the Year 2000
The Managing Agent has contingency plans for certain critical applications and
is working on such plans for others. These contingency plans involve, among
other actions, manual workarounds and selecting new relationships for such
activities as banking relationships and elevator operating systems.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Venture is exposed to market risks from adverse changes in interest rates.
In this regard, changes in U.S. interest rates affect the interest earned on the
Venture's cash and cash equivalents as well as interest paid on its
indebtedness. As a policy, the Venture does not engage in speculative or
leveraged transactions, nor does it hold or issue financial instruments for its
borrowing activities used to maintain liquidity and fund business operations.
To mitigate the impact of fluctuations in U.S. interest rates, the Venture
maintains its debt as fixed rate in nature by borrowing on a long-term basis.
Based on interest rates at March 31, 1999, a 1% increase or decrease in market
interest rates would not have a material impact on the Venture.
The following table summarizes the Venture's debt obligations at December 31,
1998. The interest rates are weighted-average rates. The fair value of the debt
obligations approximate the recorded value as of December 31, 1998.
Principal Weighted-average
(in thousands) Interest Rate
1999 $ 1,211 10.84%
2000 1,293 10.84%
2001 1,436 10.84%
2002 1,565 10.84%
2003 1,705 10.84%
Thereafter 132,522 9.05%
Total $ 139,732
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K:
None filed during the quarter ended March 31, 1999.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
VMS NATIONAL PROPERTIES JOINT VENTURE
(Registrant)
VMS National Residential Portfolio I
By: MAERIL, Inc.
Managing General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Carla R. Stoner
Carla R. Stoner
Senior Vice President Finance
and Administration
VMS National Residential Portfolio II
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Carla R. Stoner
Carla R. Stoner
Senior Vice President Finance
and Administration
Date: May 17, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from VMS National
Properties Joint Venture 1999 First Quarter 10-Q and is qualified in its
entirety by reference to such 10-Q filing.
</LEGEND>
<CIK> 0000789089
<NAME> VMS NATIONAL PROPERTIES JOINT VENTURE
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 865
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 147,017
<DEPRECIATION> (82,246)
<TOTAL-ASSETS> 70,758
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 177,715
0
0
<COMMON> 0
<OTHER-SE> (153,118)
<TOTAL-LIABILITY-AND-EQUITY> 70,758
<SALES> 0
<TOTAL-REVENUES> 7,056
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,567
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,211
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,511)
<EPS-PRIMARY> (1,625)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
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