<PAGE> 1
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 March 31, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934
For the transition period from _____________ to _____________
Commission File Number 0-14956
VMS National Hotel Partners
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
ILLINOIS 36-3370590
- --------------------------------------------- ---------------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
630 Dundee Road, Suite 220, Northbrook, Illinois 60062
- ------------------------------------------------ ---------------------------
(Address of principal executive offices) (Zip Code)
(847) 714-9600
- -------------------------------------------------------------------------------
(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> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
COMBINED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
--------- -----------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 164,699 $ 241,963
Total assets $ 164,699 $ 241,963
========= =========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
LIABILITIES
Other accounts payable and accrued expenses:
Affiliates $ 9,303 $ 2,253
Nonaffiliates 35,000 45,558
--------- ---------
Total liabilities 44,303 47,811
--------- ---------
Partners' capital (deficit)
General Partners (691,311) (690,500)
Limited Partners:
Portfolio I - 514 Interests 461,672 519,867
Portfolio II - 135 Interests 350,035 364,785
--------- ---------
Total partners' capital (deficit) 120,396 194,152
--------- ---------
Total liabilities and partners' capital (deficit) $ 164,699 $ 241,963
========= =========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
-2-
<PAGE> 3
VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the three months ended March 31,
PARTNERSHIP OPERATIONS 1999 1998
------------------------------------
<S> <C> <C>
Revenues:
Interest on temporary investments $ 2,043 $ 5,445
-------- --------
Total partnership revenues 2,043 5,445
-------- --------
Expenses:
Managing General Partners' fees 50,000 50,000
Professional, consulting and other fees:
Affiliates 15,724 24,485
Nonaffiliates 10,075 10,144
-------- --------
Total partnership expenses 75,799 84,629
-------- --------
Net loss $(73,756) $(79,184)
======== ========
Net loss allocated to General Partners $ (811) $ (870)
======== ========
Net loss allocated to Limited Partners $(72,945) $(78,3l4)
======== ========
Net loss per Limited Partner interest
Portfolio I (514 Interests) $ (113) $ (122)
======== ========
Portfolio II (135 Interests) $ (109) $ (117)
======== ========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
-3-
<PAGE> 4
VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
COMBINED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
VMS National
Hotel
Partners VMS National Hotel Portfolio I
------------- ---------------------------------------------------------------
Limited Partners
------------------------------------
General General Subscription
Partners Partners Total Notes Net Total
--------- ---------- ---------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Partners' capital (deficit)
at January 1, 1999 $ (76,276) $ (486,847) $1,679,754 $(1,159,887) $519,867 $ 33,020
Net loss for the period (74) (588) (58,195) --- (58,195) (58,783)
--------- ---------- ---------- ----------- -------- --------
Partners' capital (deficit)
at March 31, 1999 $ (76,350) $ (487,435) $1,621,559 $(1,159,887) $461,672 $(25,763)
========= ========== ========== =========== ======== ========
<CAPTION>
VMS National Hotel Portfolio II
------------------------------------------------------------------------------
Limited Partners
------------------------------------
General Subscription Combined
Partners Total Notes Net Total Totals
--------- ---------- ---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Partners' capital (deficit)
at January 1, 1999 $(127,377) $ 542,055 $ (177,270) $364,785 $237,408 $194,152
Net loss for the period (149) (14,750) --- (14,750) (14,899) (73,756)
--------- ---------- ---------- -------- -------- --------
Partners' capital (deficit)
at March 31, 1999 $(127,526) $ 527,305 $ (177,270) $350,035 $222,509 $120,396
========= ========== ========== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
-4-
<PAGE> 5
VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the three months ended March 31,
1999 1998
------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(73,756) $(79,184)
Adjustments to reconcile net loss to net cash used in operating activities:
Changes in operating assets and liabilities:
(Decrease) increase in accounts payable and accrued expenses (3,508) 4,160
-------- --------
Net cash used in operating activities and net decrease in cash and cash equivalents (77,264) (75,024)
Cash and cash equivalents at beginning of period 241,963 $475,668
-------- --------
Cash and cash equivalents at end of period $164,699 $400,644
======== ========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
-5-
<PAGE> 6
VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
MARCH 31, 1999
(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. In the opinion of the General Partner, all
adjustments necessary for fair presentation of the results of operations
for the three months ended March 31, 1999 and 1998, 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, 1998.
On May 10, 1996, the Operating Partnership and affiliated
sub-partnerships filed 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 Partnership I and Partnership
II. Pursuant to the Plan of Reorganization, the deeds to the remaining
hotels were transferred to the senior lender on September 26, 1996 in
consideration for the cancellation of the senior indebtedness (the
"Transfer"). As a result of the Transfer, the Partnerships no longer
have a source of funds.
In the short term, the Partnerships will continue to maintain a cash
reserve for the payment of the remaining Partnerships' obligations and
contingent liabilities. In the long term, the Partnerships will wind-up
their affairs and will distribute any remaining Partnerships' funds to
their Limited Partners after paying all Partnerships' expenses and the
Partnerships will be dissolved at that time. It is anticipated that the
Partnerships will be dissolved sometime in 1999 or early 2000.
Activities related to dissolution of the Partnerships represent the only
business segment.
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:
<TABLE>
<CAPTION>
Fees paid and payable for the
three months ended
March 31, 1999
Paid Payable
<S> <C> <C>
Managing General Partner
Salary (1) $50,000 $ ---
Other services and costs (2) 8,674 9,303
------- --------
$58,674 $ 9,303
======= =======
</TABLE>
6
<PAGE> 7
VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
MARCH 31, 1999
(UNAUDITED)
(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) These fees represent reimbursement for partnership accounting,
printing, legal department, data processing and travel and
communication expenses incurred by affiliates for the Managing
General Partner for operation of the Partnerships.
3. 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, 1998 filed as of March 31, 1999 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.
7
<PAGE> 8
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
The following discussion in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contain certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 which
reflect management's current views with respect to future events and financial
performance. Such forward-looking statements are subject to certain risks and
uncertainty.
On October 28, 1985, VMS National Hotel Portfolio I and II (the Partnerships)
commenced a private offering of $97,350,000 ("Offering") 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), with proceeds of the
Offering and Debt borrowing, purchased 24 hotels from Holiday Inns, Inc.
On May 10, 1996, the Operating Partnership and affiliated sub-partnerships filed
for relief under Chapter 11 of the federal bankruptcy laws in the United States
Bankruptcy Court for the Northern District of Illinois. This filing excluded
Partnership I and Partnership II. Pursuant to the Plan of Reorganization, the
deeds to the remaining hotels were transferred to the senior lender on September
26, 1996 in consideration for the cancellation of the related indebtedness (the
"Transfer").
In the short term, the Partnerships will continue to maintain a cash reserve for
the payment of the remaining Partnerships' obligations and contingent
liabilities. In the long term, the Partnerships will wind-up their affairs and
will distribute any remaining Partnerships' funds to their Limited Partners
after paying all Partnerships' expenses and the Partnerships will be dissolved
at that time. It is anticipated that the Partnerships will be dissolved sometime
in 1999 or early 2000.
In the year 2000, many existing computer programs that use only two digits
(rather than four) to identify a year in the date field could fail or create
erroneous results if not corrected. This computer program flaw is expected to
affect virtually all companies and organizations. The Partnerships believe that
with modifications to existing software and conversions to new software, the
Year 2000 issue will not pose significant operational problems for its computer
systems. There is no guarantee that the systems of other companies on which the
Partnerships' systems rely will be timely converted and would not have an
adverse effect on the Partnerships' systems.
RESULTS OF OPERATIONS
Partnership revenues for the three months ended March 31, 1999 decreased by
$3,402, or 62.5%, to $2,043 from the same period in 1998 due to a decrease in
interest income attributed to the reduction in the Partnership's cash and cash
equivalents.
8
<PAGE> 9
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
Partnership expenses for the three months ended March 31, 1999 decreased by
$8,830, or 10.4%, to $75,799 from the same period in 1998 due to a decrease in
professional, consulting and other fees due to the reduction in the
Partnerships' activities as a result of the Transfer.
LIQUIDITY AND CAPITAL RESOURCES
As a result of the Transfer in 1996, the Partnerships no longer have a source of
funds. A cash reserve is being maintained for payment of the Partnerships'
obligations and contingencies.
As shown on the Combined Statements of Cash Flows, cash used in operating
activities and cash and cash equivalents decreased $77,264 and $75,024 for the
three months ended March 31, 1999 and 1998, respectively, primarily due to net
loss from Partnership operations.
In the short term, the Partnerships will continue to maintain a cash reserve for
the payment of the remaining Partnerships' obligations and contingent
liabilities. In the long term, the Partnerships will wind-up their affairs and
will distribute any remaining Partnership' funds to their Limited Partners after
paying all Partnerships' expenses and the Partnerships will be dissolved at that
time. It is anticipated that the Partnerships will be dissolved sometime in 1999
or early 2000.
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, 1998.
9
<PAGE> 10
PART II- OTHER INFORMATION
VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
1. LEGAL PROCEEDINGS
There have been no material developments or changes from Part I, Item 3 of the
Partnerships' report on Form 10-K for the year ended December 31, 1998.
ITEMS 2 THROUGH 4
Items 2 through 6 are omitted because of the absence of conditions under which
they are required.
10
<PAGE> 11
SIGNATURES
PURSUANT to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
VMS National Hotel Partners
- ---------------------------
(Registrant)
By: VMS National Hotel Portfolio I
By: VMS Realty Investment, Ltd.
Managing General Partner
By: JAS Realty Corporation
By: /s/ Joel A. Stone Date: May 11, 1999
-------------------------------------------
Joel A. Stone, President
By: /s/ Thomas A. Gatti Date: May 11, 1999
-------------------------------------------
Thomas A. Gatti, Senior Vice President
and Principal Accounting Officer
By: VMS Realty Investment, Ltd.
Executive Committee
By: /s/ Joel A. Stone Date: May 11, 1999
-------------------------------------------
Joel A. Stone, Executive Committee Member
By: /s/ Joel A. Stone Date: May 11, 1999
-------------------------------------------
Joel A. Stone, as attorney in fact for
Peter R. Morris, Executive Committee Member
By: /s/ David Allen Date: May 11, 1999
-------------------------------------------
David Allen, as attorney in fact for Robert
D. Van Kampen, Executive Committee Member
11
<PAGE> 12
SIGNATURES (Continued)
By: VMS National Hotel Portfolio II
By: VMS Realty Investment, Ltd.
Managing General Partner
By: JAS Realty Corporation
By: /s/ Joel A. Stone Date: May, 11, 1999
-------------------------------------------
Joel A. Stone, President
By: /s/ Thomas A. Gatti Date: May 11, 1999
-------------------------------------------
Thomas A. Gatti, Senior Vice President
and Principal Accounting Officer
By: VMS Realty Investment, Ltd.
Executive Committee
By: /s/ Joel A. Stone Date: May 11, 1999
-------------------------------------------
Joel A. Stone, Executive Committee Member
By: /s/ Joel A. Stone Date: May 11, 1999
-------------------------------------------
Joel A. Stone, as attorney in fact for
Peter R. Morris, Executive Committee Member
By: /s/ David Allen Date: May 11, 1999
-------------------------------------------
David Allen, as attorney in fact for Robert
D. Van Kampen, Executive Committee Member
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VMS NATIONAL
HOTEL PORTFOLIO I, VMS NATIONAL HOTEL PORTFOLIO II, AND VMS NATIONAL HOTEL
PARTNERS 1999 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q
FILING.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 164,699
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 164,699
<CURRENT-LIABILITIES> 44,303
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 120,396
<TOTAL-LIABILITY-AND-EQUITY> 164,699
<SALES> 0
<TOTAL-REVENUES> 2,043
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 75,799
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (73,756)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> (73,756)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (73,756)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
