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 September 30, 2000
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, PO 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) 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___
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
VMS NATIONAL PROPERTIES JOINT VENTURE
COMBINED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
(Unaudited) (Note)
Assets:
<S> <C> <C>
Cash and cash equivalents $ 1,563 $ 2,004
Receivables and deposits 2,147 1,863
Restricted escrows 3,849 2,581
Other assets 451 311
Investment properties:
Land 13,404 13,404
Buildings and related personal property 137,530 135,080
Less accumulated depreciation (91,244) (86,798)
59,690 61,686
$ 67,700 $ 68,445
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 955 $ 649
Tenant security deposit liabilities 1,079 1,075
Accrued property taxes 928 598
Other liabilities 452 1,726
Due to affiliate 16 --
Accrued interest 1,047 713
Mortgage notes payable, including $30,433 and $30,101
due to an affiliate at September 30, 2000 and
December 31, 1999 respectively (Note D) 137,272 137,811
Notes payable 42,060 41,657
Deferred gain on extinguishment of debt 42,225 42,225
Partners' Deficit (158,334) (158,009)
$ 67,700 $ 68,445
Note: The balance sheet at December 31, 1999, 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
</TABLE>
<PAGE>
b)
VMS NATIONAL PROPERTIES JOINT VENTURE
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Revenues:
<S> <C> <C> <C> <C>
Rental income $ 7,465 $ 6,874 $21,934 $20,473
Other income 424 381 1,092 957
Total revenues 7,889 7,255 23,026 21,430
Expenses:
Operating 2,540 2,268 7,256 6,851
General and administrative 186 149 485 501
Depreciation 1,422 1,452 4,446 4,309
Interest 3,161 4,211 9,867 12,565
Property taxes 425 449 1,302 1,354
Total expenses 7,734 8,529 23,356 25,580
Net income (loss) $ 155 $(1,274) $ (330) $(4,150)
Net income (loss) allocated to
general partners (2%) $ 3 $ (25) $ (7) $ (83)
Net income (loss) allocated to
limited partners (98%) 152 (1,249) (323) (4,067)
$ 155 $(1,274) $ (330) $(4,150)
Net income (loss) per limited partnership interest:
Portfolio I (644 interests
issued and outstanding) $ 168 $(1,371) $ (354) $(4,463)
Portfolio II (267 interests
issued and outstanding) $ 165 $(1,371) $ (356) $(4,468)
See Accompanying Notes to Combined Financial Statements
</TABLE>
<PAGE>
c)
VMS NATIONAL PROPERTIES JOINT VENTURE
COMBINED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
VMS National Residential Portfolio I
Limited Partners
<TABLE>
<CAPTION>
General Accumulated Subscription
Partners Deficit Notes Total Total
Partners' deficit at
<S> <C> <C> <C> <C> <C>
December 31, 1999 $(3,535) $(107,157) $ (506) $(107,663) $(111,198)
Collections of
subscription notes -- -- 4 4 4
Net loss for the
nine months ended
September 30, 2000 (5) (228) -- (228) (233)
Partners' deficit at
September 30, 2000 $(3,540) $(107,385) $ (502) $(107,887) $(111,427)
</TABLE>
VMS National Residential Portfolio II
Limited Partners
<TABLE>
<CAPTION>
General Accumulated Subscription
Partners Deficit Notes Total Total
Partners' deficit at
<S> <C> <C> <C> <C> <C>
December 31, 1999 $(1,480) $ (45,002) $ (329) $ (45,331) $ (46,811)
Collections of
subscription notes -- -- 1 1 1
Net loss for the
nine months ended
September 30, 2000 (2) (95) -- (95) (97)
Partners' deficit at
September 30, 2000 $(1,482) $ (45,097) $ (328) $ (45,425) $ (46,907)
Combined total $(5,022) $(152,482) $ (830) $(153,312) $(158,334)
See Accompanying Notes to Combined Financial Statements
</TABLE>
<PAGE>
d)
VMS NATIONAL PROPERTIES JOINT VENTURE
COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net loss $ (330) $(4,150)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 4,446 4,309
Amortization of discounts 403 3,235
Change in accounts:
Receivables and deposits (284) (57)
Other assets (140) 53
Accounts payable (83) 49
Tenant security deposit liabilities 4 (8)
Accrued property taxes 330 (80)
Accrued interest 2,100 477
Other liabilities (1,274) 74
Due to affiliate 16 --
Net cash provided by operating activities 5,188 3,902
Cash flows from investing activities:
Property improvements and replacements (2,061) (1,273)
Net deposits to restricted escrows (1,268) (409)
Net cash used in investing activities (3,329) (1,682)
Cash flows from financing activities:
Payments on mortgage notes payable (2,305) (2,366)
Payments received on subscription notes 5 --
Net cash used in financing activities (2,300) (2,366)
Net decrease in cash and cash equivalents (441) (146)
Cash and cash equivalents at beginning of period 2,004 931
Cash and cash equivalents at end of period $ 1,563 $ 785
Supplemental disclosure of cash flow information:
Cash paid for interest $ 7,363 $ 8,852
Supplemental disclosure of non-cash activity:
Accrued interest added to mortgage notes payable $ 1,766 $ 489
Property improvements and replacements included in
accounts payable $ 389 $ --
See Accompanying Notes to Combined Financial Statements
</TABLE>
<PAGE>
e)
VMS NATIONAL PROPERTIES JOINT VENTURE
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 and nine months ended September 30, 2000, are not necessarily indicative
of the results that may be expected for the year ending December 31, 2000. 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 year ended
December 31, 1999.
Basis of Accounting:
The accompanying statements represent the combined financial statements of VMS
National Residential Portfolio I ("Portfolio I"), VMS National Residential
Portfolio II ("Portfolio II") (collectively the "Partnerships") and the Venture.
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
("AIMCO"), a publicly traded real estate investment trust, 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 has had or 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 are 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 of Reorganization was confirmed by the Bankruptcy Court in
March 1993 and became effective on March 31, 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 nineteen
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 (the "Senior 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 commenced 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 (the "Junior Debt") 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 Service
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 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 expense 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 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 Venture
activities. The Revised Asset Management Agreement, which was executed in
conjunction with the Venture's Plan of Reorganization, 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 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.
Asset management fees of approximately $225,000 and $229,000 were paid to an
affiliate of the Managing General Partner for the nine months ended September
30, 2000 and 1999, 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 $918,000 and $862,000 for the nine months ended
September 30, 2000 and 1999, respectively.
In addition, affiliates of the Managing General Partner received reimbursement
of accountable administrative expenses amounting to approximately $75,000 for
both the nine months ended September 30, 2000 and 1999. These expenses are
included in general and administrative expenses. Included in investment
properties and operating expenses of the Venture are construction oversight
reimbursements, paid to an affiliate of the Managing General Partner, of
approximately $53,000 and $5,000 for the nine months ended September 30, 2000
and 1999, respectively.
An affiliate of the Managing General Partner received bookkeeping reimbursements
in the amount of approximately $100,000 and $107,000 for the nine months ended
September 30, 2000 and 1999, respectively. These expenses are included in
operating expense.
During the nine months ended September 30, 2000, the Managing General Partner
has loaned the Venture funds to cover operational expenses required at Buena
Vista and Casa de Monterey Apartments. These loans were made in accordance with
the terms of the Partnership Agreement. At September 30, 2000, the balance of
the loans was approximately $16,000. Interest is charged at the prime rate plus
2% or the Managing General Partners cost, whichever is lower. Interest expense
was approximately $2,000 for the nine months ended September 30, 2000 and is
included in interest expense.
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 Venture cash. At September 30, 2000 and December 31, 1999, the
outstanding balance of approximately $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 nine months ended September 30, 2000 and
1999.
AIMCO Properties, LP ("AIMCO LP"), which owns the Managing General Partner and
which is a controlled affiliate of AIMCO, purchased (i) the junior loans on
November 19, 1999, (ii) a significant interest in the residual value of the
properties on November 16, 1999, and (iii) economic and voting rights in a 0.61%
interest in Partners Liquidating Trust in September 2000. These transactions
occurred between AIMCO LP and unrelated third parties and thus had no affect on
the combined financial statements of the Venture.
As a result of tender offers, AIMCO and its affiliates currently own 39.75 units
of limited partnership interest in Portfolio I representing 6.2% of the
outstanding limited partnership interests, along with the 2% general partner
interest for a combined ownership in Portfolio I of 8.2%. AIMCO and its
affiliates currently own 31.0 units of limited partnership interest in Portfolio
II representing 11.6% of the outstanding limited partnership interests, along
with the 2% general partner interest for a combined ownership in Portfolio II of
13.6%. The Venture is owned 70.69% by Portfolio I and 29.31% by Portfolio II
which results in AIMCO and its affiliates currently owning 8.2% of the Venture.
It is possible that AIMCO or its affiliates will make one or more additional
offers to acquire additional limited partnership interests in the Partnerships
for cash or in exchange for units in the operating partnership of AIMCO. Under
the Partnership Agreements, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters, which would
include without limitation, voting on certain amendments to the Partnership
Agreement and voting to remove the Managing General Partner. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the Managing General Partner because of their
affiliation with the Managing General Partner.
Note E - Mortgage Notes Refinanced
On December 29, 1997, the Venture refinanced the mortgages encumbering all of
its 15 properties. The refinancing resulted in each property being encumbered by
new Senior and Junior Debt. The Senior Debt each has an interest rate of 8.5%
per annum and require monthly payments of principal and interest based on a 25
year amortization period. Balloon payments of approximately $91,352,000 will be
due at maturity (January 1, 2008). The Junior Debt each has an interest rate of
10.84% per annum and requires monthly payments based on excess monthly cash
flow, as defined, for each property. The Venture anticipates that cash flow on a
long-term basis will be sufficient to meet the operating needs of the venture as
well as the requirement of the Senior Debt with any excess cash flow being
utilized to meet the requirement of the Junior Debt. Per the Junior Debt
Agreements, excess cash flow is defined as revenue generated from the operation
of a property less (1) operating expenses of the property, (2) the debt service
payment for the Senior Debt, (3) tax and insurance reserve deposit, and (4)
replacement reserve deposit.
The difference between the accrued amount of the stated rate and the actual
payment is transferred to the outstanding principal. Under a November 19, 1999,
agreement with the holder of the Senior Debt of Towers of Westchester, the
property's excess monthly cash flow is to first be used to fund a repair
reserve. On July 10, 2000, similar agreements were signed relating to North
Park, Scotchollow, Pathfinder, Buena Vista, Mountain View, Casa De Monterey, and
The Bluffs Apartments. In August 2000, similar agreements were signed relating
to Crosswood Park, Shadowood, Vista Village, Chapelle Le Grand, Watergate, and
Forest Ridge Apartments. On September 19, 2000, a similar agreement was signed
relating to Terrace Gardens Apartments. Once these reserves are fully funded,
the excess monthly cash flow will again be used as payment toward the Junior
Debt. The Senior and Junior Debt matures on January 1, 2008, and the Senior Debt
includes prepayment penalties if paid prior to January 1, 2007. The Senior Debt
retained similar terms for the previous indebtedness regarding note face amounts
and agreed valuation amounts. Upon refinancing, the Senior Debt was recorded at
the agreed valuation amount of $110,000,000, which was less than the
$152,225,000 face amount of the Senior Debt. If the Venture defaults on the
mortgage notes payable or is unable to pay the outstanding agreed valuation
amounts upon maturity, then the note face amounts become due. The Junior Debt
was recorded at their face amount at the time of the refinancing and are being
accounted for under the terms of their note agreements. Accordingly, the Venture
deferred recognition of a gain of $42,225,000, which is the difference between
the refinanced note face amounts and the agreed valuation amounts. All the debt
is cross-collateralized, but it is not cross-defaulted. Therefore, a default by
one property under the terms of its loan agreements does not in and of itself
create a default under all of the Senior and Junior Debt Agreements. However, if
the proceeds upon the sale or refinancing of any property are insufficient to
fully repay the outstanding Senior and Junior Debt related to that property, any
deficiency is to be satisfied from the sale or refinancing of the remaining
properties. As of September 30, 2000, the outstanding balance of the Senior and
Junior Debt was approximately $106,839,000 and $30,433,000, respectively.
Note F - Notes Payable
Assignment Note:
The Venture executed a $29,000,000 purchase money subordinated note (the
"Assignment Note") payable to the VMS/Stout Venture in exchange for the
assignment by the VMS/Stout Venture of its interest in the contract of sale to
the Venture. The Assignment Note is collateralized by the pledge from Portfolio
I and Portfolio II of their respective interests in the Venture.
On November 17, 1993, VMS Realty Partners assigned its 50% interest in the
VMS/Stout Venture to the Partners Liquidating Trust which was established for
the benefit of the former creditors of VMS Realty Partners and its affiliates.
The stated rate of interest on the Assignment Note (prior to modification by the
Plan) was 12% per annum (compounded semi-annually) with monthly payments of
interest only at a rate of 6%. Monthly payments on this note were discontinued
in May 1990, and the accrual of interest was discontinued after the February 22,
1991 petition filing date. Additionally, effective April 10, 1991, VMS Realty
Partners waived its right to collect interest on its portion of the Assignment
Note.
Pursuant to the Plan, the allowed claim for the Assignment Note and related
interest was $46,285,000; $3,475,000 of this amount was paid in October 1993, in
accordance with the terms of the Plan. The Venture also executed a $4,000,000
promissory note payable dated September 1, 1993 to ContiTrade Services
Corporation ("ContiTrade Note") with interest at 5% per annum. This note
represented a prioritization of payment to ContiTrade and did not represent the
assumption of any additional debt. The ContiTrade Note was to mature on January
15, 2000, and was collateralized by a Deed of Trust, Assignment of Rents and
Security Agreement on each of the Venture's retained complexes. This note was
paid with the December 29, 1997, refinancing (see "Note C").
The remaining $38,810,000 of the Assignment Note is non-interest bearing and is
payable only after payment of debt of higher priority, including the Senior and
Junior Debt. Pursuant to SOP 90-7, the Assignment Note, the Long-Term Loan
Arrangement Fee Note (as defined below) and related accrued interest were
adjusted to the present value of amounts to be paid using an estimated current
interest rate of 11.5%. At September 30, 2000, the carrying amount of the
Assignment Note is $38,810,000. Interest expense is being recognized through the
amortization of the discount over the estimated term of the note which totaled
approximately $403,000 and $3,235,000 for the nine months ended September 30,
2000 and 1999, respectively.
Long-Term Loan Arrangement Fee Note:
The Venture executed a $3,000,000 unsecured, nonrecourse promissory note, the
"Long-Term Loan Arrangement Fee Note" payable to the VMS/Stout Venture as
consideration for arranging long-term financing.
The stated rate of interest on this note prior to modification by the Plan was
10% per annum, payable on a monthly basis. Monthly interest payments on this
Note were discontinued in May 1990. Additionally, the accrual of interest on
this Note was discontinued after the February 22, 1991 petition filing date.
Pursuant to the Plan, the entire $3,250,000 balance, which included $250,000 in
unpaid accrued interest that was rolled into principal, was granted as an
allowed claim. None of this balance bears interest, and the balance is payable
only after debt of a higher priority, including Senior and Junior Debt.
Note G - 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 (6 properties), Oregon (1 property), Texas (1 property), Indiana (2
properties), Louisiana (1 property), Maryland (1 property), Nebraska (1
property), Arkansas (1 property), and Arizona (1 property). 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 segment profit (loss) before
depreciation. 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, 1999.
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 and nine months ended September 30, 2000 and
1999, 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.
Three Months Ended September 30, 2000 Residential Other Totals
Rental income $ 7,465 $ -- $ 7,465
Other income 424 -- 424
Interest expense 3,161 -- 3,161
Depreciation 1,422 -- 1,422
General and administrative expense -- 186 186
Segment profit (loss) 341 (186) 155
<TABLE>
<CAPTION>
Nine Months Ended September 30, 2000 Residential Other Totals
<S> <C> <C> <C>
Rental income $21,934 $ -- $21,934
Other income 1,081 11 1,092
Interest expense 9,464 403 9,867
Depreciation 4,446 -- 4,446
General and administrative expense -- 485 485
Segment profit (loss) 547 (877) (330)
Total assets 66,636 1,064 67,700
Capital expenditures for investment
properties 2,450 -- 2,450
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended September 30, 1999 Residential Other Totals
<S> <C> <C> <C>
Rental income $ 6,874 $ -- $ 6,874
Other income 377 4 381
Interest expense 3,133 1,078 4,211
Depreciation 1,452 -- 1,452
General and administrative expense -- 149 149
Segment loss (51) (1,223) (1,274)
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1999 Residential Other Totals
<S> <C> <C> <C>
Rental income $20,473 $ -- $20,473
Other income 944 13 957
Interest expense 9,330 3,235 12,565
Depreciation 4,309 -- 4,309
General and administrative expense -- 501 501
Segment loss (427) (3,723) (4,150)
Total assets 68,788 380 69,168
Capital expenditures for investment
properties 1,273 -- 1,273
</TABLE>
Note H - 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.
<PAGE>
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 nine months ended September 30, 2000 and 1999,
for all of the Venture's properties are as follows:
Average Occupancy
Property 2000 1999
North Park Apartments
Evansville, IN 93% 95%
Chapelle Le Grande
Merrillville, IN 94% 93%
Terrace Gardens
Omaha, NE 94% 97%
Forest Ridge Apartments
Flagstaff, AZ 96% 94%
Scotchollow
San Mateo, CA 99% 91%
Pathfinder
Fremont, CA 98% 91%
Buena Vista Apartments
Pasadena, CA 97% 100%
Mountain View Apartments
San Dimas, CA 97% 99%
Crosswood Park
Citrus Heights, CA 95% 96%
Casa de Monterey
Norwalk, CA 98% 98%
The Bluffs
Milwaukie, OR 94% 94%
Watergate Apartments
Little Rock, AR 91% 92%
Shadowood Apartments
Monroe, LA 94% 96%
Vista Village Apartments
El Paso, TX 91% 93%
The Towers of Westchester Park
College Park, MD 97% 99%
The Managing General Partner attributes the occupancy fluctuations at the
properties to the following: a decrease at Terrace Gardens due to tenants
purchasing homes; an increase at Scotchollow and Pathfinder due to more
aggressive marketing; a decrease at Buena Vista Apartments due to an increase in
rental rates which more than offset the decrease in occupancy in regards to the
property's total rent collected.
Results of Operations
The Venture recorded a net loss for the nine months ended September 30, 2000 of
approximately $330,000 as compared to a net loss of approximately $4,150,000 for
the corresponding period in 1999. For the three months ended September 30, 2000,
the Venture recorded net income of approximately $155,000 as compared to a net
loss of approximately $1,274,000 for the three months ended September 30, 1999.
The decrease in net loss for the three and nine months ended September 30, 2000,
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 both rental
and other income. Rental income increased mainly due to an increase in average
annual rental rates at all of the Venture's investment properties despite
decreases in occupancy at nine of the investment properties. Other income
increased primarily due to increases in interest income and tenant auxiliary
services.
Total expenses for the nine months ended September 30, 2000, decreased primarily
due to a reduction in interest expense which more than offset the increase in
operating and depreciation expenses. Total expenses for the three months ended
September 30, 2000, decreased primarily due to a reduction in interest expense
which more than offset the increase in operating expense. Interest expense
decreased due to a reduction in the amortization of the imputed interest on the
Venture's Assignment Note. This discount for imputed interest became fully
amortized during January 2000 which was the estimated maturity date of the
Assignment Note. Operating expenses increased due to an increase in property
expenses. The increase in property expense is primarily a result of an increase
in salary and related benefits at Scotchollow. Depreciation expense increased as
the result of depreciation taken on property improvements and replacements
placed into service during the previous twelve months.
Included in general and administrative expenses for the nine months ended
September 30, 2000 and 1999 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 each of its investment
properties within the Venture to assess the feasibility of increasing rents,
maintaining or increasing occupancy levels and protecting the Venture from
increases in expenses. 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 September 30, 2000, the Venture had cash and cash equivalents of
approximately $1,563,000 as compared to approximately $785,000 at September 30,
1999. Cash and cash equivalents decreased approximately $441,000 for the nine
months ended September 30, 2000, from the Venture's fiscal year end. The
decrease in cash and cash equivalents is the result of approximately $3,329,000
of cash used in investing activities and approximately $2,300,000 of cash used
in financing activities which was partially offset by approximately $5,188,000
of cash provided by operating activities. Cash used in financing activities
consisted of payments of principal made on the mortgages encumbering the
Registrant's properties and was slightly offset by payments received on
subscription notes. Cash used in investing activities consisted of property
improvements and replacements and 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 Venture's properties are detailed below.
The Venture had budgeted a minimum of $300 per unit for all of the properties,
which is the limit set by the Junior Debt for funding of capital improvements.
The Venture, the holder ("AIMCO LP") of the Junior Debt encumbering the
properties and the servicer of the Senior Debt encumbering the properties have
agreed to a procedure to assess whether or not capital expenditures, in addition
to those permitted under the $300 per unit minimum, are needed at the properties
and the methodology for funding any such capital expenditures. The parties
agreed upon the required capital expenditures and that these costs would be
funded out of the cash flows from the properties that otherwise would be
utilized to pay debt service on the Junior Debt. As a result, the balloon
payment due on the Junior Debt may be higher at their maturity in January 2008.
On November 19, 1999, an agreement was signed relating to the required capital
expenditures at Towers of Westchester Park. On July 10, 2000, similar agreements
were signed relating to North Park Apartments, Scotchollow, Pathfinder, Buena
Vista Apartments, Mountain View Apartments, Casa de Monterey and The Bluffs. In
August 2000, agreements were signed relating to Shadowood Apartments, Crosswood
Park Apartments, Vista Village Apartments, Watergate Apartments, Chapelle Le
Grande Apartments, and Forest Ridge Apartments and on September 19, 2000, an
agreement was signed relating to Terrace Gardens Apartments.
North Park Apartments: The methodology discussed above for funding the required
capital expenditures has been applied to North Park Apartments. The parties
agreed that this property required capital expenditures over the next nine
months that are estimated to cost approximately $150,000 and that these costs
would be funded out of cash flows from the properties that otherwise would be
utilized to pay debt service on the junior debt. Including the required capital
expenditures, the Venture has budgeted approximately $235,000 for capital
improvements during 2000 at North Park Apartments consisting primarily of
appliance replacements and structural improvements. The Venture completed
approximately $86,000 in capital expenditures at North Park Apartments as of
September 30, 2000, consisting primarily of plumbing enhancements, flooring
replacements, and swimming pool upgrades. These improvements were funded from
operating cash flow and replacement reserves.
Chapelle Le Grande: The methodology discussed above for funding the required
capital expenditures has been applied to Chapelle Le Grande Apartments. The
parties agreed that this property required capital expenditures over the next
six months that are estimated to cost approximately $90,000 and that these costs
would be funded out of cash flows from the properties that otherwise would be
utilized to pay debt service on the junior debt. Including the required capital
expenditures, the Venture budgeted approximately $122,000 for capital
improvements during 2000 at Chapelle Le Grande consisting primarily of
appliance, air conditioning, roof, balcony and flooring replacements. The
Venture completed approximately $90,000 in capital expenditures at Chapelle Le
Grande Apartments as of September 30, 2000, consisting primarily of flooring
replacements and roof replacements. These improvements were funded from
operating cash flow and replacement reserves.
Terrace Gardens: The methodology discussed above for funding the required
capital expenditures has been applied to Terrace Gardens Apartments. The parties
agreed that this property required capital expenditures over the next six months
that are estimated to cost approximately $433,000 and that these costs would be
funded out of cash flows from the properties that otherwise would be utilized to
pay debt service on the junior debt. Including the required capital
expenditures, the Venture budgeted approximately $471,000 for capital
improvements during 2000 at Terrace Gardens consisting primarily of pool deck,
roof, overhead garage doors, electrical wiring, exterior lighting and air
conditioning replacement and parking lot and plumbing improvements. The Venture
completed approximately $75,000 in capital expenditures at Terrace Gardens
Apartments as of September 30, 2000, consisting primarily of air conditioning,
water heater, and flooring replacements and structural and other building
improvements. These improvements were funded from operating cash flow and
replacements reserves.
Forest Ridge Apartments: The methodology discussed above for funding the
required capital expenditures has been applied to Forest Ridge Apartments. The
parties agreed that this property required capital expenditures over the next
six months that are estimated to cost approximately $296,000 and that these
costs would be funded out of cash flows from the properties that otherwise would
be utilized to pay debt service on the junior debt. Including the required
capital expenditures, the Venture budgeted approximately $379,000 for capital
improvements during 2000 at Forest Ridge Apartments consisting primarily of
appliance, fencing, lighting, and flooring replacements and parking lot and
structural improvements and exterior painting. The Venture completed
approximately $145,000 in capital expenditures at Forest Ridge Apartments as of
September 30, 2000, consisting primarily of appliance, water heater, flooring
replacements, exterior painting, and building improvements. These improvements
were funded from operating cash flow and replacement reserves.
Scotchollow: The methodology discussed above for funding the required capital
expenditures has been applied to Scotchollow. The parties agreed that this
property required capital expenditures over the next nine months that are
estimated to cost approximately $439,000 and that these costs would be funded
out of cash flows from the properties that otherwise would be utilized to pay
debt service on the junior debt. Including the required capital expenditures,
the Venture has budgeted approximately $564,000 for capital improvements during
2000 at Scotchollow consisting primarily of appliance and flooring replacements
and structural improvements. The Venture completed approximately $84,000 in
capital expenditures at Scotchollow as of September 30, 2000, consisting
primarily of appliance and flooring replacements, fencing, and structural
improvements. These improvements were funded from operating cash flow and
replacements reserves.
Pathfinders Village: The methodology discussed above for funding the required
capital expenditures has been applied to Pathfinders Village. The parties agreed
that this property required capital expenditures over the next nine months that
are estimated to cost approximately $1,037,000 and that these costs would be
funded out of cash flows from the properties that otherwise would be utilized to
pay debt service on the junior debt. Including the required capital
expenditures, the Venture has budgeted approximately $1,111,000 for capital
improvements during 2000 at Pathfinders Village consisting primarily of
appliance and flooring replacements and building and structural improvements.
The Venture completed approximately $341,000 in capital expenditures at
Pathfinders Village as of September 30, 2000, consisting primarily of appliance,
window coverings, cabinet, countertop, and flooring replacements, air
conditioning and heating system upgrades, clubhouse renovations, building and
structural improvements. These improvements were funded from operating cash flow
and replacements reserves.
Buena Vista Apartments: The methodology discussed above for funding the required
capital expenditures has been applied to Buena Vista Apartments. The parties
agreed that this property required capital expenditures over the next nine
months that are estimated to cost approximately $110,000 and that these costs
would be funded out of cash flows from the properties that otherwise would be
utilized to pay debt service on the junior debt. Including the required capital
expenditures, the Venture has budgeted approximately $138,000 for capital
improvements during 2000 at Buena Vista Apartments consisting primarily of
lighting replacements and building and structural improvements. The Venture
completed approximately $41,000 in capital expenditures at Buena Vista
Apartments as of September 30, 2000, consisting primarily of appliance and
flooring replacements. These improvements were funded from replacement reserves.
Mountain View Apartments: The methodology discussed above for funding the
required capital expenditures has been applied to Mountain View Apartments. The
parties agreed that this property required capital expenditures over the next
nine months that are estimated to cost approximately $134,000 and that these
costs would be funded out of cash flows from the properties that otherwise would
be utilized to pay debt service on the junior debt. Including the required
capital expenditures, the Venture has budgeted approximately $184,000 for
capital improvements during 2000 at Mountain View Apartments consisting
primarily of appliance replacements and building and structural improvements.
The Venture completed approximately $133,000 in capital expenditures at Mountain
View Apartments as of September 30, 2000, consisting primarily of appliance,
furniture, lighting and flooring replacements, parking lot and structural
improvements, and recreation facilities. These improvements were funded from
operating cash flow and replacement reserves.
Crosswood Park: The methodology discussed above for funding the required capital
expenditures has been applied to Crosswood Park Apartments. The parties agreed
that this property required capital expenditures over the next six months that
are estimated to cost approximately $301,000 and that these costs would be
funded out of cash flows from the properties that otherwise would be utilized to
pay debt service on the junior debt. Including the required capital
expenditures, the Venture budgeted approximately $355,000 for capital
improvements during 2000 at Crosswood Park consisting primarily of appliance,
piping and deck replacements and ponds and creek enhancements and balcony
repairs and various enhancements. The Venture completed approximately $93,000 in
capital expenditures at Crosswood Park Apartments as of September 30, 2000,
consisting primarily of appliances, plumbing and flooring replacements and
building improvements. These improvements were funded from cash flow and
replacement reserves.
Casa de Monterey: The methodology discussed above for funding the required
capital expenditures has been applied to Casa de Monterey. The parties agreed
that this property required capital expenditures over the next nine months that
are estimated to cost approximately $227,000 and that these costs would be
funded out of cash flows from the properties that otherwise would be utilized to
pay debt service on the junior debt. Including the required capital
expenditures, the Venture has budgeted approximately $270,000 for capital
improvements during 2000 at Casa de Monterey consisting primarily of building
and structural improvements. The Venture completed approximately $190,000 in
capital expenditures at Casa de Monterey as of September 30, 2000, consisting
primarily of appliance, cabinet, countertop, lighting and flooring replacements
and structural improvements. These improvements were funded from operating cash
flow and replacement reserves.
The Bluffs: The methodology discussed above for funding the required capital
expenditures has been applied to The Bluffs. The parties agreed that this
property required capital expenditures over the next nine months that are
estimated to cost approximately $52,000 and that these costs would be funded out
of cash flows from the properties that otherwise would be utilized to pay debt
service on the junior debt. Including the required capital expenditures, the
Venture has budgeted approximately $93,000 for capital improvements during 2000
at The Bluffs consisting primarily of plumbing, appliance and flooring
replacements, building and structural improvements. The Venture completed
approximately $31,000 in capital expenditures at The Bluffs as of September 30,
2000, consisting primarily of appliance, plumbing and flooring replacements.
These improvements were funded from replacement reserves.
Watergate Apartments: The methodology discussed above for funding the required
capital expenditures has been applied to Watergate Apartments. The parties
agreed that this property required capital expenditures over the next six months
that are estimated to cost approximately $186,000 and that these costs would be
funded out of cash flows from the properties that otherwise would be utilized to
pay debt service on the junior debt. Including the required capital
expenditures, the Venture budgeted approximately $228,000 for capital
improvements during 2000 at Watergate Apartments consisting primarily of
appliance, air conditioners, roof, plumbing fixtures, water heaters and flooring
replacements and structural and landscaping improvements. The Venture completed
approximately $71,000 in capital expenditures at Watergate Apartments as of
September 30, 2000, consisting primarily of appliance, heating system,
electrical, plumbing and flooring replacements. These improvements were funded
from operating cash flow and replacement reserves.
Shadowood Apartments: The methodology discussed above for funding the required
capital expenditures has been applied to Shadowood Apartments. The parties
agreed that this property required capital expenditures over the next six months
that are estimated to cost approximately $151,000 and that these costs would be
funded out of cash flows from the properties that otherwise would be utilized to
pay debt service on the junior debt. Including the required capital
expenditures, the Venture budgeted approximately $187,000 for capital
improvements during 2000 at Shadowood Apartments consisting primarily of
appliance, roof gutters, asphalt top course, fencing, plumbing fixtures, water
heaters, air conditioners and flooring replacements and exterior painting. The
Venture completed approximately $37,000 in capital expenditures at Shadowood
Apartments as of September 30, 2000, consisting primarily of appliance, water
heater, heating system and flooring replacements. These improvements were funded
from operating cash flow and replacement reserves.
Vista Village Apartments: The methodology discussed above for funding the
required capital expenditures has been applied to Vista Village Apartments. The
parties agreed that this property required capital expenditures over the next
six months that are estimated to cost approximately $264,000 and that these
costs would be funded out of cash flows from the properties that otherwise would
be utilized to pay debt service on the junior debt. Including the required
capital expenditures, the Venture budgeted approximately $330,000 for capital
improvements during 2000 at Vista Village Apartments consisting primarily of
lighting, fencing and roof replacements and landscaping improvements. The
Venture completed approximately $81,000 in capital expenditures at Vista Village
Apartments as of September 30, 2000, consisting primarily of appliances, air
conditioning and flooring replacements and recreational facility enhancements.
These improvements were funded from operating cash flow and replacement
reserves.
Towers of Westchester Park: The methodology discussed above for funding the
required capital expenditures has been applied to Towers of Westchester Park.
The parties agreed that this property required capital expenditures during 2000
that are estimated to cost approximately $920,000 and that these costs would be
funded out of cash flows from the properties that otherwise would be utilized to
pay debt service on the junior debt. Including the required capital
expenditures, the Venture has budgeted approximately $1,011,000 for capital
improvements during 2000 at Towers of Westchester Park consisting primarily of
appliance, air conditioning, electrical, water heater, light fixtures, plumbing,
cabinet, heating and flooring replacements and landscaping, pool and structural
improvements. The Venture completed approximately $952,000 in capital
expenditures at Towers of Westchester Park as of September 30, 2000, consisting
primarily of cabinet, appliance, heating system, air conditioning, plumbing and
flooring replacements, major landscaping and structural improvements. These
improvements were funded from operating cash flow and replacement reserves.
Both on a short-term and long-term basis, the Managing General Partner monitors
the rental market environment of each of the investment properties within the
Venture to assess the feasibility of increasing rents, maintaining or increasing
occupancy levels and protecting the Venture from increases in expenses all of
which have an impact on the Venture's liquidity. The Venture's current assets
are thought to be sufficient for any short-term needs (exclusive of capital
improvements, as discussed above and below) of the Venture. The Senior Debt
encumbering all of the properties totals approximately $106,839,000 and is being
amortized over 25 years, with a balloon payment of $91,352,000 due January 2008.
The Junior Debt, which also matures January 2008, totals approximately
$30,433,000 and requires monthly payments based upon monthly excess cash flow
for each property. Per the Junior Debt Agreements, excess cash flow is defined
as revenue generated from the operation of a property less (1) operating
expenses of the property, (2) the debt service payment for the Senior Loan, (3)
tax and insurance reserve deposit, and (4) replacement reserve deposit. Under a
November 19, 1999, agreement with the holder of the Senior Loan of Towers of
Westchester, the property's excess monthly cash flow is to first be used to fund
a repair reserve. On July 10, 2000, similar agreements were signed relating to
North Park, Scotchollow, Pathfinder, Buena Vista, Mountain View, Casa De
Monterey, and The Bluffs Apartments. In August 2000, similar agreements were
signed relating to Crosswood Park, Shadowood, Vista Village, Chapelle Le Grand,
Watergate, and Forest Ridge Apartments. On September 19, 2000, a similar
agreement was signed relating to Terrace Gardens Apartments. Once these reserves
are fully funded, the excess monthly cash flow will be used as payment toward
the Junior Debt. The Venture anticipates that cash flow on a long-term basis
will be sufficient to meet the operating needs of the Venture as well as the
requirements of the senior loans with any excess cash flow being utilized to
meet the requirements of the junior debt. The Assignment Note and Long-Term
Arrangement Fee Notes totaling approximately $42,060,000 are non-interest
bearing and are subordinate to the Senior and Junior Debt.
AIMCO LP, which owns the Managing General Partner and which is a controlled
affiliate of AIMCO, purchased (i) the Junior Debt on November 19, 1999, (ii) a
significant interest in the residual value of the properties on November 16,
1999 and (iii) economic and voting rights in a 0.61% interest in Partners
Liquidating Trust in September 2000. These transactions occurred between AIMCO
LP and unrelated third parties and thus had no affect on the combined financial
statements of the Venture. In connection with AIMCO LP's purchase of the Junior
Debt, (i) the seller, which owned the senior loans on the properties until
October 1998, acknowledged its prior consent to $1,749,286 of capital
expenditures made on the properties in addition to those funded pursuant to the
capital expenditure reserves for the senior and junior loans, which capital
expenditures were funded out of cash flow that would otherwise have been used to
pay debt services on the Junior Debt, and (ii) certain convenience as to the
timeliness and completion of certain scheduled deferred maintenance items were
waived. In addition, AIMCO LP, the Venture, and the servicer of the senior loans
encumbering the properties (the "Servicer") agreed to a procedure to assess
whether or not capital expenditures, in addition to permitted capital
expenditures of $300 per unit per year, are needed at each property and the
methodology for funding any such capital expenditures. Capital expenditures that
are identified pursuant to these procedures likely will be funded out of cash
flow from the properties that otherwise would be used to service the Junior Debt
on the properties; longer term capital expenditures so identified likely will be
funded through an increase in required capital expenditure reserve funding.
Although the effect of such additional capital expenditures, and the funding
therefore, cannot be determined with precision at this time, the Venture
anticipates that the additional capital expenditures at the properties
identified pursuant to the procedures described above, and the funding therefor,
will significantly increase the period of time that it takes to amortize the
junior loans, may cause the junior loans to negatively amortize for some period
of time, and may result in or increase the amount of balloon payments due on the
junior loans at the end of the term. If the properties cannot be refinanced or
sold at or before the end of such term for a sufficient amount, the Venture will
risk losing such properties through foreclosure. There can be no assurance of
the effect that such additional capital expenditures, and the funding therefor,
will have on the operations of the properties, or whether the properties 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 nine months ended September 30, 2000 and 1999. 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 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 timing of debt maturities, refinancings and/or property
sales. The subpartnerships' distribution policies are reviewed on an annual
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 during the remainder of 2000 or subsequent
periods.
<PAGE>
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
trading purposes. The Venture is exposed to changes in interest rates primarily
as a result of 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 September 30, 2000, an increase or
decrease of 100 basis points in market interest rate would not have a material
impact on the Venture's Senior or Junior Debt. The Managing General Partner
considers estimation of the fair value for the Assignment and Long-Term
Arrangement Fee Notes Payable to be impracticable as there is currently no
market in which the Venture could obtain similar financing.
The following table summarizes the Venture's Senior and Junior Debt obligations
at September 30, 2000. The interest rates represent the weighted-average rates.
The fair value of the debt obligations approximated the recorded value as of
September 30, 2000.
<TABLE>
<CAPTION>
Long-term Debt
Principal Weighted-average
(in thousands) Interest Rate
<S> <C> <C> <C>
2000 $ 253 8.50%
2001 1,419 8.50%
2002 1,553 8.50%
2003 1,692 8.50%
2004 1,825 8.50%
Thereafter 130,530 9.04%
$137,272
</TABLE>
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a)Exhibit 11, Calculation of Net Income (Loss) Per Investor, is
filed as an exhibit to this report.
b)Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
c)Reports on Form 8-K:
None filed during the quarter ended September 30, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
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/Martha L. Long
Martha L. Long
Senior Vice President and
Controller
VMS National Residential Portfolio II
By: MAERIL, Inc.
Managing General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President and
Controller
Date: November 14, 2000
<PAGE>
Exhibit 11
VMS NATIONAL PROPERTIES JOINT VENTURE
CALCULATION OF NET INCOME (LOSS) PER INVESTOR
(in thousands, except unit data)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
VMS National Properties net income (loss) $ 156 $(1,274) $ (328) $(4,151)
Portfolio I net (loss) income -- -- (1) 1
Portfolio II net loss (1) -- (1) --
Combined net income (loss) $ 155 $(1,274) $ (330) $(4,150)
Portfolio I allocation: 70.69% $ 110 $ (901) $ (232) $(2,934)
-- -- (1) 1
$ 110 $ (901) $ (233) $(2,933)
Net income (loss) to general partner (2%) $ 2 $ (18) $ (5) $ (59)
Net income (loss) to limited partners (98%) $ 108 $ (883) $ (228) $(2,874)
Number of Limited Partner units 644 644 644 644
Net income (loss) per limited partnership
interest $ 168 $(1,371) $ (354) $(4,463)
Portfolio II allocation: 29.31% $ 46 $ (373) $ (96) $(1,217)
(1) -- (1) --
$ 45 $ (373) $ (97) $(1,217)
Net income (loss) to general partner (2%) $ 1 $ (7) $ (2) $ (24)
Net income (loss) to limited partners (98%) $ 44 $ (366) $ (95) $(1,193)
Number of Limited Partner units 267 267 267 267
Net income (loss) per limited partnership
interest $ 165 $(1,371) $ (356) $(4,468)
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