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 June 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>
June 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 100,990,686 1,799,857
Cash and cash equivalents 12,656,515 6,179,655
Escrow and other deposits 109,125 103,988
Accounts receivable 2,630,308 2,676,744
Interest receivable 190,857 191,632
Prepaid expenses 1,346,386 1,403,700
Inventories 1,613,076 1,642,633
Other deferred costs 388,400 388,400
______________ ______________
Total assets $ 119,925,353 $ 112,886,616
============== ==============
</TABLE>
LIABILITIES AND PARTNERS' DEFICIT
<TABLE>
<S> <C> <C>
LIABILITIES NOT SUBJECT TO COMPROMISE
Mortgage loans payable $ --- $261,170,960
Accrued interest payable --- 102,866,332
Other accounts payable
and accrued expenses:
Affiliates 152,755 114,357
Nonaffiliates 7,203,597 5,453,963
______________ ______________
Total liabilities not subject
to compromise 7,356,352 369,605,612
______________ ______________
LIABILITIES SUBJECT TO COMPROMISE
Mortgage loans payable 261,170,960 ------
Accrued interest payable 107,350,251 ------
Other accounts payable
and accrued expenses:
Affiliates ------ ------
Nonaffiliates ------ ------
______________ ______________
Total liabilities subject
to compromise 368,521,211 ------
______________ ______________
Commitments and contingencies ------ ------
______________ ______________
Partners' Deficit:
General Partners (3,505,337) (3,513,379)
Limited Partners:
Portfolio I - 514 Interests (201,586,737) (202,197,907)
Portfolio II - 135 Interests (50,860,136) (51,007,710)
______________ ______________
Total partners' deficit (255,952,210) (256,718,996)
______________ ______________
Total liabilities and
partners' deficit $ 119,925,353 $ 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 SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
______________ ______________
<S> <C> <C>
HOTEL OPERATIONS
Revenues:
Rooms $ 30,245,602 $ 29,003,467
Food and beverage 7,651,035 7,929,326
Telephone 1,519,776 1,284,768
Other 1,658,105 1,556,810
______________ ______________
Total hotel revenues 41,074,518 39,774,371
Direct costs and expenses:
Rooms 7,665,737 7,832,988
Food and beverage 6,306,017 6,639,030
Telephone 1,483,358 1,488,569
Other 1,056,248 1,015,060
______________ ______________
Total direct hotel costs
and expenses 16,511,360 16,975,647
Unallocated expenses:
Administrative and general 3,846,164 5,487,195
Management fees 869,340 648,145
Marketing 3,836,696 3,958,095
Energy 1,893,078 1,935,282
Property operations and maintenance 1,916,026 2,073,553
Property taxes and insurance 1,669,072 1,414,675
Rent 550,292 489,923
Mortgage interest expense (contractual
interest for 1996 - $11,092,162) 7,983,919 11,110,803
Depreciation --- 6,102,970
______________ _____________
Total unallocated expenses 22,564,587 33,220,641
______________ _____________
Income(loss) from hotel operations 1,998,571 (10,421,917)
______________ _____________
PARTNERSHIP OPERATIONS
Revenues:
Interest on subscription notes 43,466 52,221
Interest on temporary investments 27,610 74,462
______________ _____________
Total partnership revenues 71,076 126,683
______________ _____________
Expenses:
Managing General Partners' fees 743,787 688,064
Professional, consulting and other fees:
Affiliates 134,185 121,092
Nonaffiliates 62,954 177,240
______________ _____________
Total partnership expenses 940,926 986,396
______________ _____________
Loss from partnership operations (869,850) (859,713)
______________ _____________
REORGANIZATION ITEMS:
Professional, consulting and other fees 397,028 ------
______________ _____________
Total reorganization expenses 397,028 ------
______________ _____________
Net income(loss) $ 731,693 $ (11,281,630)
============== ==============
Net income(loss) allocated to
General Partners $ 8,042 $ (123,986)
============== ==============
Net income(loss) allocated to
Limited Partners $ 723,651 $ (11,157,644)
============== ==============
Net income(loss)
Portfolio I (514 Interests) $ 1,123 $ (17,318)
============== ==============
Portfolio II (135 Interests) $ 1,084 $ (16,712)
=============== ==============
</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 JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
______________ ______________
<S> <C> <C>
HOTEL OPERATIONS
Revenues:
Rooms $ 16,087,479 $ 15,212,115
Food and beverage 3,885,783 4,001,323
Telephone 739,658 622,181
Other 885,347 794,178
______________ ______________
Total hotel revenues 21,598,267 20,629,797
Direct costs and expenses:
Rooms 4,000,375 4,064,326
Food and beverage 3,221,680 3,383,247
Telephone 762,919 701,913
Other 546,924 513,871
______________ ______________
Total direct hotel costs
and expenses 8,531,898 8,663,357
Unallocated expenses:
Administrative and general 1,667,682 2,651,887
Management fees 436,079 345,006
Marketing 1,985,390 2,012,804
Energy 986,725 909,313
Property operations and maintenance 974,024 1,017,757
Property taxes and insurance 839,970 624,907
Rent 280,284 245,454
Mortgage interest expense (contractual
interest for 1996 - $5,546,081) 2,437,838 5,586,088
Depreciation --- 3,003,014
______________ _____________
Total unallocated expenses 9,607,992 16,396,230
______________ _____________
Income(loss) from hotel operations 3,458,377 (4,429,790)
______________ _____________
PARTNERSHIP OPERATIONS
Revenues:
Interest on subscription notes 41,161 36,518
Interest on temporary investments 12,182 38,062
______________ _____________
Total partnership revenues 53,343 74,580
______________ _____________
Expenses:
Managing General Partners' fees 418,646 337,958
Professional, consulting and other fees:
Affiliates 63,704 47,398
Nonaffiliates 23,084 130,315
______________ _____________
Total partnership expenses 505,434 515,671
______________ _____________
Loss from partnership operations (452,091) (441,091)
______________ _____________
REORGANIZATION ITEMS:
Professional, consulting and other fees 397,028 ------
______________ _____________
Total reorganization expenses 397,028 ------
______________ _____________
Net income(loss) $ 2,609,258 $ (4,870,881)
============== ==============
Net income(loss) allocated to
General Partners $ 28,677 $ (53,531)
============== ==============
Net income(loss) allocated to
Limited Partners $ 2,580,581 $ (4,817,350)
============== ==============
Net income(loss)
Portfolio I (514 Interests) $ 4,005 $ (7,477)
============== ==============
Portfolio II (135 Interests) $ 3,865 $ (7,216)
=============== ==============
</TABLE>
<PAGE>
VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
STATEMENT OF PARTNERS' DEFICIT (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Partners' Collections Net income for
deficit on the six Partners'
at January 1, subscription months ended deficit at
1996 notes June 30, 1996 June 30, 1996
<S> <C> <C> <C> <C>
VMS National Hotel Partners:
General Partners $ (333,135) --- $ 732 $(332,403)
VMS National Hotel
Portfolio I:
General Partners (2,534,012) --- 5,832 (2,528,180)
Limited Partners:
Total (200,989,511) --- 577,327 (200,412,184)
Subscription
notes (1,208,396) 33,843 --- (1,174,553)
Net (202,197,907) 33,843 577,327 (201,586,737)
Total (204,731,919) 33,843 583,159 (204,114,917)
VMS National Hotel
Portfolio II:
General Partners (646,232) --- 1,478 (644,754)
Limited Partners:
Total (50,824,560) --- 146,324 (50,678,236)
Subscription
notes (183,150) 1,250 --- (181,900)
Net (51,007,710) 1,250 146,324 (50,860,136)
Total (51,653,942) 1,250 147,802 (51,504,890)
Combined
Totals $(256,718,996) $ 35,093 $ 731,693 $(255,952,210)
</TABLE>
<PAGE>
VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
COMBINED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
_______________ _______________
<S> <C> <C>
OPERATING AND REORGANIZATION ACTIVITIES
Net income(loss) $ 731,693 $ (11,281,630)
Adjustments to reconcile net income (loss)
to net cash provided by operating and
reorganization activities:
Depreciation --- 6,102,970
Decrease (increase) in accounts receivable 46,436 (553,851)
Decrease in interest receivable 775 5,034
Decrease (increase) in prepaid expenses 57,314 (794,661)
Decrease in inventories 29,557 15,406
Increase (decrease) in accounts payable
and accrued expenses 1,788,032 (1,092,289)
Increase in accrued interest payable 4,483,919 8,610,804
_______________ ______________
NET CASH PROVIDED BY OPERATING
AND REORGANIZATION ACTIVITIES 7,137,726 1,011,783
_______________ ______________
INVESTING ACTIVITIES
Additions to property and improvements (690,822) (4,609,241)
_______________ ______________
CASH USED IN INVESTING
ACTIVITIES (690,822) (4,609,241)
_______________ ______________
FINANCING ACTIVITIES
Partners' capital contributions 35,093 41,335
(Increase)decrease in escrow and
other deposits (5,137) 164,222
_______________ ______________
NET CASH PROVIDED BY FINANCING ACTIVITIES 29,956 205,557
______________ ______________
Net increase (decrease) in cash
and cash equivalents 6,476,860 (3,391,901)
_______________ ______________
Cash and cash equivalents at beginning
of period 6,179,655 9,840,142
_______________ ______________
Cash and cash equivalents at
end of period $ 12,656,515 $ 6,448,241
=============== ==============
Interest paid $ 3,500,000 $ 2,500,000
=============== ==============
</TABLE>
<PAGE>
VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
JUNE 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 3),
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 are to be held for sale and accordingly are classified
as Property and Improvements held for sale on the Combined Balance
Sheet at June 30, 1996 and no further depreciation expense is being
recorded on the Partnerships subsequent to December 31, 1995.
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 six months ended June 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. 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 six months ended
June 30, 1996
Paid Payable
Managing General
Partner salary (1) $ 50,000 $ ---
Asset Management fees (2) 677,524 146,748
____________ ___________
Total management fees
and salary 727,524 146,748
Other services and
costs (3) 153,356 6,007
____________ ___________
$ 880,880 $ 152,755
============ ===========
(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.
3. 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. Under Chapter 11, certain claims against the VMS
National Hotel Partners in existence prior to the filing of the petitions
for relief under the federal bankruptcy laws are stayed while VMS National
Hotel Partners continues business operations. These claims are reflected
in the June 30, 1996 balance sheet as "liabilities subject to compromise".
All other pre-petition claims are reflected on the June 30, 1996 balance
sheet as liabilities not subject to compromise and, as contemplated in the
Plan of Reorganization, are expected to be paid 100%.
4. Mortgage Payments
Beginning August 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. Any cash flow
payments will continue to be applied to the accrued unpaid interest.
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 will turnover substantially all of their
property to certain of their secured creditors. The transfer of this
property is currently anticipated to occur in 1996. 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
As of June 30, 1996, the Operating Partnership is under contract to
sell one hotel. This hotel is classified as property and improvements
held for sale at June 30, 1996 and at December 31, 1995. Also, as
previously stated in Note 1, all remaining properties are to be held for
sale and accordingly are classified as Property and Improvements held
for sale on the Combined Balance Sheet at June 30, 1996. 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 $1,582,967 was repaid out of the sale
proceeds. In addition, the Operating Partnership received $36,000 in
repayment of the closing payment.
<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.
As of June 30, 1996, the Partnerships owned and operated 15 hotels in
nine states. 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. In
addition, the Partnerships have entered into a contract to sell one hotel
in 1996.
Liquidity and Capital Resources
The Partnerships' main sources of funds are 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 have contributed to an overall
decrease in value of the Partnerships' properties.
As shown on the Combined Statements of Cash Flows, cash and cash
equivalents increased $6,476,860 from December 31, 1995 to June 30,
1996. The increase has two major components. First, cash provided by
operating and reorganization activities generated cash during the first
six 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.
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 footnote 8 of the Financial
Statements.
Results of Operations
Total hotel revenues for the six months ended June 30, 1996 exceeded
revenues for the same period during the prior year by $1,300,147 or
3.3% due to higher hotel occupancies and average daily rates. The
average occupancy for the portfolio during the first half of 1996
improved to 71.2% from 68.2% during the first half of 1995 and the
average daily rate improved to $62.15 from $58.53. All but three
hotels experienced growth in revenues for the first half of 1996.
Additionally, several hotels in the chronically sluggish Los Angeles
area generated higher revenues, which indicates improvement in the
local economy. The improvement in average daily rate for the
portfolio produced significantly higher departmental profits, as on
average, $3.62 for each room sold was not offset by any additional
expenses.
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. This favorable demand and supply
relationship is expected to exist for the next two years, producing
strong gains in revenues and profits, before growth stabilizes with
the construction of new hotels. In addition, each hotel is situated
within a few miles of a major metropolitan area, proximate to a business
district or airport, and is well positioned to capitalize on improving
and stable market conditions.
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 June 30, 1996 decreased by 3% 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 32% in the first six 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 $6,102,970 for the
first six months of 1995 to $0 for the first six months of 1996. Second,
due to the adoption of SOP 90-7 (see Note 1), interest expense is not
recognized while the Partnerships are in bankruptcy. Therefore, interest
expense decreased from $11,110,803 for the six months ended June 30,
1995 to $7,983,919 for the same time period in 1996. Third, 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 six months of 1995 incurred for
real estate tax analysis, appraisals and other consulting services
were not incurred for the same time period in 1996.
Management fees increased primarily due to the overall increases in
revenues described above. Marketing expenditures declined for the
period due to the sale of one hotel and reduced labor costs. Energy
and maintenance expenditures also decreased as a result of the sale
of one hotel in 1995.
<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. This
action is stayed due to VMS Arkansas Hotel Associates' bankruptcy
proceeding.
Items 2 through 4
Items 2 through 6 are omitted because of the absence of conditions under
which they are required.
<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 Hotel Partners
(Registrant)
By: VMS National Hotel Portfolio I
By: VMS Realty Investment, Ltd.
Managing General Partner
By: JAS Realty Corporation
Date: August 13, 1996 By: /s/ Joel A. Stone
Joel A. Stone, President
Date: August 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: August 13, 1996 By: /s/ Joel A. Stone
Joel A. Stone, President
Date: August 13, 1996 By: /s/ Thomas A. Gatti
Thomas A. Gatti,
Senior Vice President
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 12,656,515
<SECURITIES> 0
<RECEIVABLES> 2,630,308
<ALLOWANCES> 0
<INVENTORY> 1,613,076
<CURRENT-ASSETS> 0
<PP&E> 100,990,686
<DEPRECIATION> 0
<TOTAL-ASSETS> 119,925,353
<CURRENT-LIABILITIES> 0
<BONDS> 261,170,960
<COMMON> 0
0
0
<OTHER-SE> (255,952,210)<F1>
<TOTAL-LIABILITY-AND-EQUITY> 119,925,353
<SALES> 0
<TOTAL-REVENUES> 41,145,594
<CGS> 16,511,360
<TOTAL-COSTS> 31,092,028
<OTHER-EXPENSES> 1,337,954
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,983,919
<INCOME-PRETAX> 731,693
<INCOME-TAX> 0
<INCOME-CONTINUING> 731,693
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 731,693
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Represents deficit capital of partners
</FN>
