SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the quarterly period ended September 30, 1996
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 0-14956
VMS National Hotel Partners
(Exact name of registrant as specified in its charter)
Illinois
(State or other jurisdiction of incorporation or organization)
36-3370590
(I.R.S. Employer Identification Number)
8700 West Bryn Mawr, Chicago, Illinois
(Address of principal executive offices)
60631
(Zip Code)
(312)399-8700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X . No .
<PAGE>
PART I
Item 1.
VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
COMBINED BALANCE SHEETS
<TABLE>
ASSETS
<CAPTION>
September 30, 1996 December 31, 1995
(Unaudited)
___________________ __________________
<S> <C> <C>
Property and Improvements:
Land $ --- $ 15,571,626
Building and Improvements --- 149,020,464
Equipment, furniture and fixtures --- 58,309,267
______________ ______________
--- 222,901,357
Less accumulated depreciation --- (124,401,350)
______________ ______________
--- 98,500,007
Property and improvements
held for sale --- 1,799,857
Cash and cash equivalents 1,297,965 6,179,655
Escrow and other deposits --- 103,988
Accounts receivable --- 2,676,744
Interest receivable 189,713 191,632
Prepaid expenses 12,700 1,403,700
Inventories --- 1,642,633
Other deferred costs --- 388,400
______________ ______________
Total assets $ 1,500,378 $ 112,886,616
============== ==============
</TABLE>
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<S> <C> <C>
LIABILITIES
Mortgage loans payable $ --- $261,170,960
Accrued interest payable --- 102,866,332
Other accounts payable
and accrued expenses:
Affiliates 151,668 114,357
Nonaffiliates 4,709 5,453,963
______________ ______________
Total liabilities 156,377 369,605,612
______________ ______________
Partners' Capital (Deficit:)
General Partners (677,813) (3,513,379)
Limited Partners:
Portfolio I - 514 Interests 1,430,787 (202,197,907)
Portfolio II - 135 Interests 591,027 (51,007,710)
______________ ______________
Total partners' capital (deficit) 1,344,001 (256,718,996)
______________ ______________
Total liabilities and
partners' capital (deficit) $ 1,500,378 $ 112,886,616
============== ==============
</TABLE>
<PAGE>
VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
_________________________________
1996 1995
______________ ______________
<S> <C> <C>
HOTEL OPERATIONS
Revenues:
Rooms $ 46,593,341 $ 45,448,849
Food and beverage 11,379,465 11,888,548
Telephone 2,229,625 1,931,486
Other 2,638,080 2,394,435
______________ ______________
Total hotel revenues 62,840,511 61,663,318
Direct costs and expenses:
Rooms 11,866,634 11,906,891
Food and beverage 9,599,143 9,938,283
Telephone 2,177,871 2,193,294
Other 1,559,891 1,554,200
______________ ______________
Total direct hotel costs
and expenses 25,203,539 25,592,668
Unallocated expenses:
Administrative and general 6,809,682 7,797,161
Management fees 1,349,601 1,280,691
Marketing 5,829,277 5,986,065
Energy 2,978,149 3,069,466
Property operations and maintenance 2,973,509 3,072,086
Property taxes and insurance 2,490,445 2,079,964
Rent 802,432 727,850
Mortgage interest expense 16,455,405 16,735,861
Depreciation --- 8,582,715
______________ _____________
Total unallocated expenses 39,688,500 49,331,859
______________ _____________
Loss from hotel operations (2,051,528) (13,261,209)
______________ _____________
PARTNERSHIP OPERATIONS
Revenues:
Interest on subscription notes 62,655 58,674
Interest on temporary investments 33,596 106,305
______________ _____________
Total partnership revenues 96,251 164,979
______________ _____________
Expenses:
Managing General Partners' fees 1,010,589 1,013,050
Professional, consulting and other fees:
Affiliates 216,846 160,829
Nonaffiliates 85,120 267,761
______________ _____________
Total partnership expenses 1,312,555 1,441,640
______________ _____________
Loss from partnership operations (1,216,304) (1,276,661)
______________ _____________
REORGANIZATION ITEMS:
Professional, consulting and other fees 275,000 ------
______________ _____________
Total reorganization expenses 275,000 ------
______________ _____________
Loss before recognized
loss on sale of property
and improvements, and extraordinary
gain from the extinguishment of
debt (3,542,832) (14,537,870)
Loss recognized on sale of
property and improvements --- (510,012)
______________ ______________
Loss before extraordinary
gain from extinguishment of debt (3,542,832) (15,047,882)
Extraordinary gain from
extinguishment of debt 261,556,070 ---
_____________ _____________
Net income (loss) $ 258,013,238 $ (15,047,882)
============== ==============
Net income(loss) allocated to
General Partners $ 2,835,566 $ (165,377)
============== ==============
Net income(loss) allocated to
Limited Partners $ 255,177,672 $ (14,882,505)
============== ==============
Loss before
extraordinary item:
Portfolio I (514 Interests) $ (5,439) $ (23,100)
============== ==============
Portfolio II (135 Interests) $ (5,248) $ (22,291)
============== ==============
Extraordinary item:
Portfolio I (514 Interests) $ 401,509 $ ---
============= =============
Portfolio II (135 Interests) $ 387,452 $ ---
============= =============
Net income(loss)
Portfolio I (514 Interests) $ 396,070 $ (23,100)
============== ==============
Portfolio II (135 Interests) $ 382,204 $ (22,291)
=============== ==============
</TABLE>
<PAGE>
VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
______________ ______________
<S> <C> <C>
HOTEL OPERATIONS
Revenues:
Rooms $ 16,347,739 $ 16,445,382
Food and beverage 3,728,430 3,959,222
Telephone 709,849 646,718
Other 979,975 837,625
______________ ______________
Total hotel revenues 21,765,993 21,888,947
Direct costs and expenses:
Rooms 4,200,897 4,073,903
Food and beverage 3,293,126 3,299,253
Telephone 694,513 704,725
Other 503,643 539,140
______________ ______________
Total direct hotel costs
and expenses 8,692,179 8,617,021
Unallocated expenses:
Administrative and general 2,841,490 2,309,966
Management fees 403,705 632,546
Marketing 1,992,581 2,027,970
Energy 1,085,071 1,134,184
Property operations and maintenance 1,057,483 998,533
Property taxes and insurance 821,373 665,289
Rent 252,140 237,927
Mortgage interest expense 8,471,486 5,625,058
Depreciation --- 2,479,745
______________ _____________
Total unallocated expenses 16,925,329 16,111,218
______________ _____________
Loss from hotel operations (3,851,515) (2,839,292)
______________ _____________
PARTNERSHIP OPERATIONS
Revenues:
Interest on subscription notes 19,189 6,453
Interest on temporary investments 5,986 31,843
______________ _____________
Total partnership revenues 25,175 38,296
______________ _____________
Expenses:
Managing General Partners' fees 343,358 324,986
Professional, consulting and other fees:
Affiliates 82,661 39,737
Nonaffiliates 22,166 90,521
______________ _____________
Total partnership expenses 448,185 455,244
______________ _____________
Loss from partnership operations (423,010) (416,948)
______________ _____________
REORGANIZATION ITEMS:
Professional, consulting and other fees ------ ------
______________ _____________
Total reorganization expenses ------ ------
______________ _____________
Loss before recognized
loss on sale of property and
improvements, and extraordinary
gain from extinguishment of debt (4,274,525) (3,256,240)
Loss recognized on sale of
property and improvements --- (510,012)
______________ ______________
Loss before extraordinary
gain from extinguishment of debt (4,274,525) (3,766,252)
Extraordinary gain from
extinguishment of debt 261,556,070 ---
______________ ______________
Net income (loss) $ 257,281,545 $ (3,766,252)
============== ==============
Net income(loss) allocated to
General Partners $ 2,827,524 $ (41,391)
============== ==============
Net income(loss) allocated to
Limited Partners $ 254,454,021 $ (3,724,861)
============== ==============
Loss before
extraordinary item:
Portfolio I (514 Interests) $ (6,562) $ (5,782)
============== ==============
Portfolio II (135 Interests) $ (6,332) $ (5,579)
============== ==============
Extraordinary item:
Portfolio I (514 Interests) $ 401,509 $ ---
============= ==============
Portfolio II (135 Interests) $ 387,452 $ ---
============= ==============
Net income(loss)
Portfolio I (514 Interests) $ 394,947 $ (5,782)
============== ==============
Portfolio II (135 Interests) $ 381,120 $ (5,579)
=============== ==============
</TABLE>
<PAGE>
VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
STATEMENT OF PARTNERS' DEFICIT (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Partners' Collections Net income for
deficit on the nine Partners'
at January 1, subscription months ended deficit at
1996 notes Sept 30, 1996 Sept 30, 1996
<S> <C> <C> <C> <C>
VMS National Hotel Partners:
General Partners $ (333,135) --- $258,013 $ (75,122)
VMS National Hotel
Portfolio I:
General Partners (2,534,012) --- 2,056,366 (477,646)
Limited Partners:
Total (200,989,511) --- 203,580,185 2,590,674
Subscription
notes (1,208,396) 48,509 --- (1,159,887)
Net (202,197,907) 48,509 203,580,185 1,430,787
Total (204,731,919) 48,509 205,636,551 953,141
VMS National Hotel
Portfolio II:
General Partners (646,232) --- 521,187 (125,045)
Limited Partners:
Total (50,824,560) --- 51,597,487 772,927
Subscription
notes (183,150) 1,250 --- (181,900)
Net (51,007,710) 1,250 51,597,487 591,027
Total (51,653,942) 1,250 52,118,674 465,982
Combined
Totals $(256,718,996) $ 49,759 $285,013,238 $ 1,344,001
</TABLE>
<PAGE>
VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
COMBINED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
_______________ _______________
<S> <C> <C>
OPERATING AND REORGANIZATION ACTIVITIES
Net income(loss) $ 258,013,238 $ (15,047,882)
Adjustments to reconcile net income (loss)
to net cash (used in) provided by operating
and reorganization activities:
Loss recognized on sale of
property and improvements --- 510,012
Depreciation --- 8,582,715
Extraordinary gain from the
extinguishment of debt (261,556,070) ---
Changes in operating assets and liabilities:
Increase in accounts receivable (302,664) (138,357)
Decrease in interest receivable 1,919 2,669
Decrease (increase) in prepaid expenses 736,702 (1,058,553)
Decrease in inventories 20,990 51,565
Decrease in other deferred costs 3,841 33,926
Increase (decrease) in accounts payable
and accrued expenses 2,399,271 (1,277,118)
(Decrease) increase in accrued
interest payable (3,148,216) 10,235,861
_______________ ______________
NET CASH (USED IN) PROVIDED BY OPERATING
AND REORGANIZATION ACTIVITIES (3,830,989) 1,894,838
_______________ ______________
INVESTING ACTIVITIES
Additions to property and improvements (1,904,608) (5,356,996)
Net proceeds from sale of property and
improvements 810,160 1,739,800
_______________ ______________
NET CASH USED IN INVESTING
ACTIVITIES ( 1,094,448) (3,617,196)
_______________ ______________
FINANCING ACTIVITIES
Partners' capital contributions 49,759 54,676
Principal payment on mortgage
loan payable --- (1,582,968)
(Increase)decrease in escrow and
other deposits (6,012) 136,707
_______________ ______________
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 43,747 (1,391,585)
______________ ______________
Net decrease in cash
and cash equivalents (4,881,690) (3,113,943)
_______________ ______________
Cash and cash equivalents at beginning
of period 6,179,655 9,840,142
_______________ ______________
Cash and cash equivalents at
end of period $ 1,297,965 $ 6,726,199
=============== ==============
Interest paid $ 19,603,621 $ 6,500,000
=============== ==============
</TABLE>
<PAGE>
VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
1. Basis of Accounting
The accompanying unaudited combined financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information, with the instructions to Form 10-Q and Article
10 of Regulation S-X, and, due to the filed petitions for relief under Chapter
11 of the federal bankruptcy laws in the United States Bankruptcy Court for
the Northern District of Illinois (See Note 2), AICPA State of Position 90-7
"Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code", which was adopted by the Partnership as of May 10, 1996.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial
statements.
In March 1995, the FASB issued Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of, which requires impairment losses to be recorded on long-lived assets
used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less
than the assets' carrying amount. Statement 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Partnerships have adopted Statement 121 in the first quarter of 1996 and,
based on current circumstances, the effects of adoption are as follows:
pursuant to the Plan of Reorganization all remaining properties had been
held for sale and accordingly were classified as Property and Improvements
held for sale on the Combined Balance Sheet as January 1, 1996 and no
further depreciation expense was recorded on the Partnerships subsequent
to that date.
In the opinion of the General Partner, all adjustments (consisting only of
normal recurring accruals and the effect of adopting FASB Statement No.
121) necessary for fair presentation of the results of operations for the nine
months ended September 30, 1996 and 1995, have been made to the
financial information furnished herein. For further information refer to the
combined financial statements and footnotes thereto included in the
Partnerships' annual report on Form 10-K for the year ended December 31,
1995.
2. Petition for Relief Under Chapter 11
On May 10, 1996, VMS National Hotel Partners and affiliated
subpartnerships filed petitions for relief under Chapter 11 of the federal
bankruptcy laws in the United States Bankruptcy Court for the Northern
District of Illinois. This filing excludes VMS National Hotel Portfolio I
and II. Pursuant to the Plan of Reorganization, the deeds to the properties
were transferred to the senior lender on September 26, 1996 in
consideration for the cancellation of the senior indebtedness.
As a result of this transfer, the Partnerships recognized an extraordinary gain
of $214,542,473 for financial reporting purposes, which represents the
excess of the remaining senior debt, related accrued interest, other operating
liabilities and net cash received by the Partnerships of $810,160 (in
conjunction with this transfer, VMS National Hotel Partners received amounts
in lieu of sales advisory fees totalling $1,025,000 from the senior lender, net
of $214,840 of operating cash transferred to the senior lender), over the
carrying value of the property and improvements and operating assets
transferred. In addition, the Partnerships recognized an extraordinary gain
of $47,013,597 from the cancellation of the junior mortgage indebtedness
pursuant to the Plan of Reorganization.
3. Related Party Transactions
Under the terms of the various Partnership Agreements, the Managing
General Partner and its affiliates are to provide management, financing and
other services to Portfolio I, Portfolio II and the Operating Partnership in
return for certain fees as follows:
Fees paid and payable for the nine months ended
September 30, 1996
Paid Payable
Managing General
Partner salary (1) $ 50,000 $ ---
Asset Management fees (2) 1,070,069 135,107
____________ ___________
Total management fees
and salary 1,120,069 135,107
Other services and
costs (3) 205,163 16,561
____________ ___________
$ 1,325,232 $ 151,668
============ ===========
(1) The Partnership Agreements specify the dollar amount of this fee. The
various Partnerships are obligated to incur in the aggregate, $50,000 per
year of salary fees in the future.
(2) This fee is assessed at 1.75% of gross revenues of the Hotels.
(3) These fees represent reimbursement for partnership accounting,
printing, legal department, data processing and travel and communication
expenses incurred by affiliates of the Managing General Partner for
operation of the Partnerships.
4. Mortgage Payments
Beginning September 11, 1994 (ie consummation date of the Second
Amended and Restated Note Purchase and Loan Agreement) and
continuing until May 10, 1996 interest accrued on the senior debt at the
note rate of 10%. In accordance with SOP 90-7, the accrual of interest on
the senior debt was discontinued as of the Bankruptcy filing date due to the
"unsecured" or "undersecured" positions on these notes' obligations. In
conjunction with the transfer of the properties to the senior lender (see Note
2) the Partnerships made interest payments of $16,103,021. In conjunction
with the interest payments the Partnerships recorded $8,471,486 of interest
expense, which represents contractual interest for the period from May 10,
1996 through the transfer date of September 26, 1996.
5. Litigation
Certain affiliates of the Partnerships, including the Managing General
Partner and certain officers and directors of such affiliates are parties to
certain pending legal proceedings as described in Form 10-K for the year
ended December 31, 1995 filed as of March 31, 1996 and certain other
proceedings. The adverse outcome of any one or more legal proceedings
against any one of the affiliates which provides financial support or services
to the Partnerships could have a materially adverse effect on the present
and future operations of the Partnerships. There can be no assurance as
to the outcome of any of the legal proceedings.
6. Liquidity
The financial statements have been prepared assuming that the
Partnerships will continue as going concerns. On April 8, 1996, each of the
Operating Partnerships solicited votes on a prepackaged Plan of
Reorganization (the "Plan"). On May 3, 1996, sufficient votes to confirm the
Plan were received. On May 10, 1996, the Operating Partnerships each
commenced a voluntary case under Chapter 11 of title 11 of the United
States Code in the United States Bankruptcy Court for the Northern District
of Illinois (the "Bankruptcy Court"). The Plan was confirmed by the
Bankruptcy Court on July 24, 1996. As a result, the Operating Partnerships
turned over substantially all of their property to certain of their secured
creditors on September 26, 1996; the senior mortgage debt was cancelled
upon the transfer; and junior "undersecured" debt in the amount of
$47,013,597 was cancelled. Furthermore, affiliates of the Managing General
Partner have announced the existence of serious financial difficulties which
may have an effect on the ability of the Managing General Partner to function
in that capacity. These conditions raise substantial doubt about the
Partnerships' ability to continue as going concerns. The combined financial
statements do not include any adjustments to reflect the possible future
effects on the recoverability of assets or the settlement of liabilities that
may result from the possible inability of the Partnerships to continue as
going concerns.
7. Sale of Hotels
In 1995, the Partnerships sold the Milwaukee West Quality Inn to an
unaffiliated third party as a gross sales price of $1,800,000. The
Partnerships recognized a loss of $886,000 at December 31, 1994 for
financial reporting purposes to reduce the carrying value of the Quality Inn
to its estimated sales price, and an additional loss of $510,012 was
recognized in 1995 as a result of a downward adjustment of the sales price
as well as the payment of costs associated with the closing. Principal on the
first mortgage of $1,582,968 was repaid out of the sale proceeds.
<PAGE>
Part I
VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
On October 28, 1985, VMS National Hotel Portfolio I and II (the
Partnerships) commenced a private offering of $97,350,000 in Limited
Partnership interests pursuant to their respective Private Placement
Memorandums. A total of 649 units were offered and sold at $150,000 per
unit. Subscribers for the Units had the option to contribute partially in cash
upon subscription with the remaining purchase price payable in annual
installments over a five year period or on a basis other than the foregoing
option, which was acceptable to the Managing General Partner in its sole
discretion. The Limited Partner selecting to pay in the remaining purchase
price of their units over a five year period executed and delivered to the
Partnerships full recourse notes payable.
VMS National Hotel Partners (the Operating Partnership) originally intended
to purchase 28 hotels from Holiday Inns, Inc. (HII). Under the terms of the
offering, investors would receive a rebate of a portion of their capital
contribution if fewer than 28 hotels were acquired. Only 24 hotels were
actually purchased, resulting in a $15,000 per unit rebate to each Limited
Partner. The $15,000 per unit was payable over a five year period to each
Limited Partner who elected the five year payment option. The Limited
Partners who elected the all-cash option or who prepaid their notes received
the $15,000 per United rebate upon payment of their purchase price of
$150,000 per Unit.
Originally, the Operating Partnership owned and operated 24 hotels located
in 11 states throughout the continental United States of which four hotels
were sold in 1992, two hotels were sold in 1993, two hotels were sold in
1994 and one hotel was sold in 1995. On September 26, 1996, the
Partnerships turned over all of their remaining 15 properties to the senior
mortgage lender pursuant to the Plan of Reorganization.
Liquidity and Capital Resources
The Partnerships' main sources of funds had been the operations or
dispositions of its hotel properties. These properties, in the aggregate, had
been incurring deficits after debt service payments due to an inability to
reach rental rates and occupancies originally projected. In addition to
affecting the Partnerships' ability to meet debt service payments, these
deficits contributed to an overall decrease in value of the Partnerships'
properties.
As shown on the Combined Statements of Cash Flows, cash and cash
equivalents decreased $4,881,690 from December 31, 1995 to September
30, 1996. The decrease has several components. First, cash used in
operating and reorganization activities during the first nine months of 1996
as a result of continued higher occupancy and room rates. In addition,
business interruption insurance proceeds in the amount of $366,240 were
received for the Van Nuys hotel, which has not been operational since the
January 1994 earthquake. Second, cash used in investing activities
decreased significantly as the result of a decrease in improvements to the
properties. However, these sources of cash were offset by interest
payments to the senior lender in the total amount of $19,603,621.
Recent Developments - VMS Realty Partners and Affiliates
There have been no material developments or changes from the Recent
Developments - VMS Realty Partners and Affiliates disclosed in Part I, Item
1 of the Partnerships' report on Form 10-K for the year ended December
31, 1995 except the item noted in footnotes 1, 2, 4, and 7 of the Financial
Statements.
Results of Operations
Total hotel revenues for the nine months ended September 30, 1996
exceeded revenues for the same period during the prior year by $1,177,193
or 1.9% due to higher hotel occupancies and average daily rates. The
average occupancy for the portfolio during the first nine months of 1996
improved to 72.8% from 70.9% during the first nine months of 1995 and the
average daily rate improved to $62.68 from $57.54. Additionally, several
hotels in the chronically sluggish Los Angeles area generated higher
revenues, due to an improvement in the local economy.
Over the last three years, moderate economic growth and limited new
construction of full-service, mid-scale hotels have created a relationship
where the rate of growth in demand for hotel rooms has exceeded the rate
of growth in supply, driving up the price of hotel occupancy and related room
revenues.
Food and beverage revenues declined for the period due to the sale of one
hotel in 1995 and decreased consumption by hotel guests. Also, telephone
revenues improved as a result of a global adjustment to long distance access
charges.
Direct costs and expenses associated with the hotels for the period ended
September 30, 1996 decreased by 1.5% relative to the same period in 1995
due to the sale of one hotel in 1995. These costs and expenses were
significantly lower as a percentage of revenues due to higher average daily
rates and greater operating efficiencies due to downsizing.
Total unallocated expenses decreased by 20% in the first nine months of
1996 as compared with the same time period in 1995. This decrease has
four components. First, due to the adoption of FASB Statement No. 121
(see Note 1), depreciation expense decreased from $8,582,715 for the first
nine months of 1995 to $0 for the first nine months of 1996. Second, the
Partnerships received $366,240 in business interruption insurance proceeds,
which is shown as a reduction of administrative and general expense.
Finally, approximately $450,000 included in administration and general
expense during the first nine months of 1995 incurred for real estate tax
analysis, appraisals and other consulting services were not incurred for the
same time period in 1996.
<PAGE>
PART II - OTHER INFORMATION
VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
1. Legal Proceedings
As disclosed in the prior reports on Form 10-Q or Form 10-K ("Prior Public
Filings"), the Partnerships, including the General Partners, VMS Realty
Partners, now known as VMS Realty Partners L.P., certain officers and
directors of VMS Realty Partners, now known as VMS Realty Partners L.P.,
and certain other affiliates of the Partnerships are parties to certain pending
legal proceedings which were summarized in Form 10-K for the year ended
December 31, 1995 (other than litigation matters covered by insurance
policies). The adverse outcome of certain of the legal proceedings disclosed
in this Report and the Prior Public Filings could have a materially adverse
effect on the present and future operations of the Partnerships.
Summarized below is a legal proceeding recently filed against VMS
Arkansas Hotel Associates, VMS Realty Partners, now known as VMS
Realty Partners L.P., and its affiliates. The inclusion in this Report of any
legal proceeding or development in any legal proceeding is not intended as
a representation by the Partnership that such particular proceeding is
material. For the action summarized below in which the plaintiffs are seeking
damages, the amount of damages being sought is an amount to be proven
at trial unless otherwise specified. There can be no assurance as to the
outcome of any of the legal proceedings summarized in this Report or in
Prior Public Filings.
Janelle Romandia, as parent and next friend of Brandy Romandia, a minor,
v. VMS Arkansas Hotel Associates, an Illinois general partnership, and
American General Hospitality, Inc., d/b/a Holiday Inn-North Little Rock,
United States District Court Eastern District of Arkansas, Little Rock Division,
Case Number LR-C-96-579. Class Action Complaint filed July 29, 1996.
Plaintiff, as mother and friend of Brandy Romandia, a minor, brought the
action on behalf of Brandy Romandia and all other persons similarly situated.
The plaintiff's counsel seeks to have class members consisting of all
persons who use wheelchairs for ambulation and who have attempted to
utilize facilities of the Holiday Inn North Little Rock since January 26, 1992.
Injunctive Relief is sought to order defendants to modify and make the hotel
readily accessible to, and usable by, plaintiff and other persons with
disabilities. VMS Arkansas Hotel Associates' has been dismissed from this
action.
Items 2 through 4
Items 2 through 6 are omitted because of the absence of conditions under
which they are required.
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SIGNATURES
PURSUANT to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
VMS National Hotel Partners
(Registrant)
By: VMS National Hotel Portfolio I
By: VMS Realty Investment, Ltd.
Managing General Partner
By: JAS Realty Corporation
Date: November 13, 1996 By: /s/ Joel A. Stone
Joel A. Stone, President
Date: November 13, 1996 By: /s/ Thomas A. Gatti
Thomas A. Gatti,
Senior Vice President
By: VMS National Hotel Portfolio II
By: VMS Realty Investment, Ltd.
Managing General Partner
By: JAS Realty Corporation
Date: November 13, 1996 By: /s/ Joel A. Stone
Joel A. Stone, President
Date: November 13, 1996 By: /s/ Thomas A. Gatti
Thomas A. Gatti,
Senior Vice President
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