-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PqcbVN1M+gLn5fTUre/ciMM9H3K3JPjA9c6hH5lHVrnweqWXvO/qh8RXRgXl87gQ WmR6/+tGJnBYDb10AsL5ag== 0000313499-98-000004.txt : 19980814 0000313499-98-000004.hdr.sgml : 19980814 ACCESSION NUMBER: 0000313499-98-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VMS NATIONAL PROPERTIES JOINT VENTURE CENTRAL INDEX KEY: 0000789089 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 363311347 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14194 FILM NUMBER: 98684910 BUSINESS ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLAZA STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8032391000 MAIL ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLAZA STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 10-Q 1 FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES 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 June 30, 1998 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.) One Insignia Financial Plaza, P. O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (ZIP code) (864) 239-1000 (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 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) VMS NATIONAL RESIDENTIAL PORTFOLIO I VMS NATIONAL RESIDENTIAL PORTFOLIO II (Illinois limited partnerships) VMS NATIONAL PROPERTIES (an Illinois partnership) AND SUBPARTNERSHIPS COMBINED BALANCE SHEETS (in thousands) June 30, December 31, 1998 1997 (Unaudited) (Note) Assets: Cash and cash equivalents $ 1,088 $ 2,510 Receivables and deposits 2,025 1,872 Restricted escrows 2,429 86 Other assets 206 478 Investment properties: Land 13,404 13,404 Buildings and personal property 131,584 130,603 Less accumulated depreciation (77,961) (75,411) 67,027 68,596 $ 72,775 $ 73,542 Liabilities and Partners' Deficit Liabilities Accounts payable $ 521 $ 369 Tenant security deposit liabilities 1,122 1,105 Accrued property taxes 493 605 Other liabilities 713 994 Accrued interest 1,044 -- Mortgage notes payable 139,290 139,449 Notes payable 35,425 33,455 Deferred gain on extinguishment of debt 42,225 42,225 Partners' Deficit (148,058) (144,660) $ 72,775 $ 73,542 Note:The balance sheet at December 31, 1997, has been derived from the audited financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. See Accompanying Notes to Combined Financial Statements b) VMS NATIONAL RESIDENTIAL PORTFOLIO I VMS NATIONAL RESIDENTIAL PORTFOLIO II (Illinois limited partnerships) VMS NATIONAL PROPERTIES (an Illinois partnership) AND SUBPARTNERSHIPS COMBINED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per interest data) Three Months Ended Six Months Ended June 30, June 30, 1998 1997 1998 1997 Revenues: Rental income $ 6,606 $ 5,986 $13,064 $11,973 Other income 264 276 550 506 Casualty gain -- -- 223 -- Total revenues 6,870 6,262 13,837 12,479 Expenses: Operating 2,495 2,497 4,921 4,708 General and administrative 150 233 348 462 Depreciation 1,387 1,348 2,778 2,679 Interest 4,167 4,127 8,266 8,257 Property taxes 391 422 805 839 Loss on disposal of property 49 8 126 8 Total expenses 8,639 8,635 17,244 16,953 Net loss $(1,769) $(2,373) $(3,407) $(4,474) Net loss allocated to general partners (2%) $ (35) $ (47) $ (68) $ (89) Net loss allocated to limited partners (98%) (1,734) (2,326) (3,339) (4,385) $(1,769) $(2,373) $(3,407) $(4,474) Net loss per limited partnership interest: Portfolio I (644 interests issued and outstanding) $(1,902) $(2,549) $(3,663) $(4,811) Portfolio II (267 and 268 interests issued and outstanding in 1998 and 1997, respectively) $(1,906) $(2,554) $(3,670) $(4,802) See Accompanying Notes to Combined Financial Statements c) VMS NATIONAL RESIDENTIAL PORTFOLIO I VMS NATIONAL RESIDENTIAL PORTFOLIO II (Illinois limited partnerships) VMS NATIONAL PROPERTIES (an Illinois partnership) AND SUBPARTNERSHIPS COMBINED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT (Unaudited) (in thousands)
VMS National Residential Portfolio I Limited Partners General Accumulated Subscription Partners Deficit Notes Total Total Partners' deficit at December 31, 1997 $ (3,347) $ (97,932) $ (511) $ (98,443) $(101,790) Collections of subscription notes -- -- 5 5 5 Net loss for the six months ended June 30, 1998 (48) (2,359) -- (2,359) (2,407) Partner's deficit at June 30, 1998 $ (3,395) $(100,291) $ (506) $(100,797) $(104,192) VMS National Residential Portfolio II Limited Partners General Accumulated Subscription Partners Deficit Notes Total Total Partners' deficit at December 31, 1997 $(1,401) $ (41,134) $ (335) $ (41,469) $ (42,870) Collections of subscription Notes -- -- 4 4 4 Net loss for the six months ended June 30, 1998 (20) (980) -- (980) $ (1,000) Partner's deficit at June 30, 1998 $(1,421) $ (42,114) $ (331) $ (42,445) $ (43,866) Combined total $(4,816) $(142,405) $ (837) $(143,242) $(148,058) See Accompanying Notes to Combined Financial Statements
d) VMS NATIONAL RESIDENTIAL PORTFOLIO I VMS NATIONAL RESIDENTIAL PORTFOLIO II (Illinois limited partnerships) VMS NATIONAL PROPERTIES (an Illinois partnership) AND SUBPARTNERSHIPS COMBINED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Six Months Ended June 30, 1998 1997 Cash flows from operating activities: Net loss $ (3,407) $ (4,474) Adjustments to reconcile net loss to net Cash provided by operating activities: Depreciation 2,778 2,679 Amortization of discounts and loan costs 1,970 1,792 Loss on disposal of property 126 8 Casualty gain (223) -- Change in accounts: Receivables and deposits 146 (1,143) Other assets 272 366 Accounts payable 152 (36) Tenant security deposit liabilities 17 (12) Accrued property taxes (112) (13) Accrued interest 1,768 1,369 Other liabilities (556) 69 Net cash provided by operating activities 2,931 605 Cash flows from investing activities: Property improvements and replacements (1,160) (588) Net deposits to restricted escrows (2,343) (9) Net insurance proceeds 24 -- Net cash used in investing activities (3,479) (597) Cash flows from financing activities: Payments on mortgage notes payable (883) (157) Payments received on subscription notes 9 7 Net cash used in financing activities (874) (150) Net decrease in cash and cash equivalents (1,422) (142) Cash and cash equivalents at beginning of period 2,510 1,788 Cash and cash equivalents at end of period $ 1,088 $ 1,646 Supplemental disclosure of cash flow information: Cash paid for interest $ 4,528 $ 5,085 Supplemental disclosure of non-cash activity: Accrued interest added to mortgage notes payable $ 724 $ -- At June 30, 1998, in connection with a fire at Pathfinder Village Apartments, investment properties, receivables and deposits, and other liabilities were adjusted $175,000, $299,000, and $275,000, respectively, for non-cash activity. See Accompanying Notes to Combined Financial Statements VMS NATIONAL RESIDENTIAL PORTFOLIO I VMS NATIONAL RESIDENTIAL PORTFOLIO II (Illinois Limited Partnerships) VMS NATIONAL PROPERTIES (an Illinois partnership) AND SUBPARTNERS 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") 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 six months ended June 30, 1998, are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. For further information, refer to the combined financial statements and footnotes thereto included in the Venture's annual report on Form 10-K for the fiscal year ended December 31, 1997. Certain reclassifications have been made to the 1997 information to conform to the 1998 presentation. NOTE B - PETITION FOR RELIEF UNDER CHAPTER 11 AND PLAN OF REORGANIZATION On February 22, 1991, the Venture filed for Chapter 11 bankruptcy protection in the United States Bankruptcy court in the Central District of California. The initial filing included only the residential apartment complexes directly owned by the Venture (entities included in the filing herein after referred to collectively as the Debtor) and excluded the 10 Subpartnerships consisting of 10 residential apartment complexes encumbered by financing insured or held by the Department of Housing and Urban Development ("HUD"), and the investing limited partnerships Portfolio I and Portfolio II. Due to the partnership agreements existing between the Venture, Portfolio I and Portfolio II, which provide the Venture with exclusive rights to the limited partner investor contributions, the Venture's initial filing was amended to reflect the Venture's right to receive any excess limited partner investor contributions. The Venture's Plan was confirmed by the Bankruptcy Court in March 1993 and became effective on September 30, 1993 (the "Effective Date"). During 1997, the Plan was modified in order to allow the Venture to refinance the debt encumbering it's properties. The bankruptcy plan was closed by the Bankruptcy Court on April 29, 1998. The Primary aspects of the Venture's Plan of Reorganization included the following: (a) The Venture retained 17 properties from the existing portfolio (the "retained properties"), and abandoned title of the remaining properties (the "non-retained properties") to the Federal Deposit Insurance Corporation (the "FDIC"). The retained properties consisted of one HUD property and sixteen non- HUD properties. Two of the seventeen retained properties were sold during the second quarter of 1996. All of the non-retained properties were foreclosed upon as of December 31, 1996. (b) The Venture restructured the existing senior-lien debt obligations on the retained properties (except for one of the retained properties which had a first mortgage lien insured by HUD and two of the retained properties which had senior liens formerly payable to the FDIC, as successor to Beverly Hills Mortgage Corporation ("BH")) to provide for an interest rate of 8.75% per annum effective as of the first day of the month of the Effective Date with payments based on a 30 year amortization commencing on the first monthly payment due thereafter with a maturity of January 15, 2000. The senior lien collateralized by HUD on one of the retained properties was not modified, and the senior liens formerly held by the FDIC were modified to accrue at 9% per annum effective as of the first day of the month of the Effective Date with monthly payments of interest only made at 7% per annum commencing with the first monthly payments due thereafter on the FDIC value, as defined in "c" below. All of the senior-lien debt was refinanced on December 29, 1997. (c) As it pertained to the existing BH junior mortgages on the retained properties, the FDIC reduced its claim on two of the properties to $300,000 per property evidenced by a non-interest bearing note scheduled to mature January 15, 2000, and left in place liens for the full amount of its claims at the petition date for all other retained properties. Interest on the former FDIC loans for these retained properties accrued at 10% per annum on the FDIC value (total property value per the FDIC's June 1992 valuations less the property's senior lien indebtedness) commencing as of the first day of the month of the Effective Date and monthly payments of interest only at 7% per annum on the FDIC value will commence with the first monthly payment due thereafter. (The retained property governed by a HUD Regulatory Agreement made payments of interest only following the approval by HUD of the Surplus Cash calculation.) On October 28, 1995, the FDIC sold all of the debt it held related to the retained properties to BlackRock Capital Finance, L.P. The debt amounts and terms were not modified. On December 29, 1997, all of the junior mortgages were refinanced. (d) The Venture distributed the following amounts in conjunction with the terms of the Plan: (1) approximately $5,980,000 to satisfy unsecured prepetition creditor claims of the nonaffiliated note payable to Security Pacific National Bank, trade creditors, and property taxes on the retained properties; (2) approximately $1,056,000 to provide for allowed and unclassified administrative claims; and (3) approximately $5,960,000 to make capital improvements at the retained properties. This capital improvement reserve was exhausted during 1995. (e) The VMS/Stout Joint Venture (the "VMS/Stout Venture") was formed pursuant to an agreement dated August 18, 1984, which was amended and restated on October 4, 1984. VMS Realty Partners has a 50% interest and affiliates of the Seller (as defined below) have a 50% interest in the VMS/Stout Venture. The VMS/Stout Venture, the J.D. Stout Company ("Stout") and certain affiliates of Stout entered into a contract of sale dated August 18, 1984, which was amended on October 4, 1984. The contract provided for the sale by Stout and other owners (collectively the "Seller") of the 51 residential apartment complexes to the VMS/Stout Venture. The VMS/Stout Venture assigned its interest as purchaser to the Venture. During 1987, Stout assigned its interest in the VMS/Stout Joint Venture to ContiTrade Service Corporation ("ContiTrade"). On November 17, 1993, VMS Realty Partners assigned its interest in the VMS/Stout Joint Venture to the Partners Liquidating Trust. The VMS/Stout Joint Venture was granted an allowed claim in the amount of $49,535,000 for the Assignment and Long-Term Loan Arrangement Notes payable to them by the Venture. Payments totaling $3,475,000 in conjunction with this allowed claim were made to the nonaffiliated members of the VMS/Stout Joint Venture on October 7, 1993. The Venture also executed a $4,000,000 promissory note dated September 1, 1993, to ContiTrade Services Corporation (the "ContiTrade Note") in connection with these allowed note claims. The ContiTrade Note represents a prioritization of payments to ContiTrade of the first $4,000,000 in repayments made under the existing Assignment and Long-Term Loan Arrangement Notes payable to the VMS/Stout Joint Venture, and does not represent an additional $4,000,000 claim payable to ContiTrade. In addition to prioritizing ContiTrade's receipt of the first $4,000,000 of repayments on the old notes, the ContiTrade Note provides for 5% non-compounding interest on the outstanding principal balance calculated daily on the basis of a 360 day year. The ContiTrade Note was secured by a Deed of Trust, Assignment of Rents and Security Agreement on each of the Venture's retained properties, and provided ContiTrade with other approval rights as to the ongoing operations of the Venture's retained properties. The ContiTrade Note, which was scheduled to mature January 15, 2000, was paid off on December 29, 1997. (f) The Venture entered into a Revised Restructured Amended and Restated Asset Management Agreement (the "Revised Asset Management Agreement") with Insignia Financial Group, Inc. ("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 out-of-pocket costs incurred in connection with their services up to $200,000 per calendar year. These amounts were 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, senior mortgage payments, minimum interest payment requirements on the former FDIC mortgages, and any debt service and principal payments currently due on any liens of encumbrances senior to the ContiTrade Deeds of Trust. If insufficient operating cash flow exists after the funding of these items, the balance of Insignia's fees and reimbursements could be paid from available partnership cash sources. Additionally, the asset management fee payable to Insignia were reduced proportionately for each of the Venture's retained complexes which were sold or otherwise disposed of from time to time. Accordingly, the fee was reduced upon the disposition of Bellevue and Carlisle Square in 1996. The Venture engaged Insignia to commence property management of all of the Venture's retained complexes effective January 1, 1994. The asset management agreement was again revised on December 30, 1997. Effective January 1, 1998, the agreement provided for an annual service fee of $300,000 to be paid to Insignia in monthly installments. In addition Insignia will receive reimbursement of a fixed amount of $100,000 per year for out-of- pocket costs incurred in connection with its services. NOTE C - TRANSACTIONS WITH AFFILIATED PARTIES The Venture has no employees and is dependent on the Managing General Partner and its affiliates for the management and administration of all partnership activities. Effective December 12, 1997, MAERIL, a wholly-owned subsidiary of MAE GP Corporation ("MAE GP") and an affiliate of Insignia, became the Managing General Partner of VMS National Residential Portfolio I and VMS National Residential Portfolio II (the "Partnerships"), replacing VMSRIL. Effective February 25, 1998, MAERIL became a wholly-owned subsidiary of Insignia Properties Trust ("IPT"), which is an affiliate of Insignia. Effective January 1, 1998, the Venture and Insignia agreed to amend the Asset Management Agreement to reduce the annual service fee to $300,000 per year, and to reduce the annual out of pocket cost reimbursements to $100,000. These costs are paid throughout the year and are included in general and administrative expenses. In addition, bookkeeping reimbursements in the amount of approximately $73,000 and property management fees in the amount of approximately $558,000 (both included in operating expenses) were paid to an affiliate of the Managing General Partner during the six months ended June 30, 1998. On March 17, 1998, Insignia entered into an agreement to merge its national residential property management operations, and its controlling interest in Insignia Properties Trust, with Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The closing, which is anticipated to happen in September or October of 1998, is subject to customary conditions, including government approvals and the approval of Insignia's shareholders. If the closing occurs, AIMCO will then control the Managing General Partner of the Venture. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Average occupancy rates for the six months ended June 30, 1998 and 1997, for the Partnership's properties are as follows: Average Occupancy Property 1998 1997 Buena Vista Apartments Pasadena, CA 99% 98% Casa de Monterey Norwalk, CA 94% 95% Crosswood Park Citrus Heights, CA 96% 94% Mt. View Apartments San Dimas, CA 98% 98% Pathfinder Fremont, CA 91% 96% Scotchollow San Mateo, CA 94% 99% The Bluffs Milwaukie, OR 97% 95% Vista Village Apartments El Paso, TX 94% 91% Chapelle Le Grande Merrillville, IN 93% 98% North Park Apartments Evansville, IN 97% 96% Shadowood Apartments Monroe, LA 96% 90% The Towers of Westchester Park College Park, MD 96% 93% Terrace Gardens Omaha, NE 97% 94% Watergate Apartments Little Rock, AR 93% 93% Forest Ridge Apartments Flagstaff, AZ 90% 78% The Managing General Partner attributes the occupancy fluctuations at the properties to the following: a decrease at Pathfinder due to a fire which caused repairs to be made to one entire building during 1998 and rental rate increases; decrease at Scotchollow due to rental rate increases and lower interest rates enticing first time homebuyers; decrease at Chapelle Le Grande due to home purchases in the area; an increase at Shadowood Apartments due to improved market conditions; and an increase at Forest Ridge Apartments due to effective marketing and management. Despite the occupancy decreases at Pathfinder and Scotchollow, rental income increased at these properties as a result of rate increases. The Venture realized a net loss of approximately $3,407,000 for the six months ended June 30, 1998, compared to a net loss of approximately $4,474,000 for the corresponding period of 1997. For the three months ended June 30, 1998, the Venture realized net loss of approximately $1,769,000 compared to a net loss of approximately $2,373,000 for the three months ended June 30, 1997. The decrease in net loss for the three and six month periods ended June 30, 1998, is primarily attributable to increased rental revenue due to increased rental rates at most of the Venture's properties. Other income also increased during the six months ended June 30, 1998, primarily due to an increase in lease cancellation fees at Scotchollow Apartments due to early moveouts of first time homebuyers and an increase in cleaning and damage fees at Scotchollow Apartments and Pathfinder Apartments. Additionally, the Venture recorded a casualty gain that resulted from the accrual of insurance proceeds, in connection with a fire at Pathfinder Village. Also contributing to the decrease in net loss was a decrease in general and administrative expenses. The decrease in general and administrative expenses is primarily due to a decrease in asset management fees and reimbursements resulting from the revised Asset Management Agreement, which was effective January 1, 1998. Partially offsetting the increase in revenues and the decrease in general and administrative expenses during the six months ended June 30, 1998, was an increase in operating expenses and an increase in loss on disposal of property. Operating expenses for the six months ended June 30, 1998, increased primarily due to increased utilities at Forest Ridge, Pathfinder, Towers of Westchester, Vista Village and Casa De Monterrey. The loss on disposal of property resulted from the write-off of roofs that were not fully depreciated at the time of roof replacement projects at Chapelle Le Grande, Mountain View Apartments and Casa de Monterey during the six months ended of June 30, 1998. These losses were greater than a similar loss on disposal of property at Terrace Gardens during the corresponding period of 1997. Included in operating expense for the six months ended June 30, 1998, is approximately $200,000 in major repairs and maintenance comprised primarily of exterior building repairs, exterior painting, and landscaping. Included in operating expense for the six months ended June 30, 1997, is approximately $233,000 in major repairs and maintenance comprised primarily of landscaping, parking lot repairs and exterior building repairs. 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 to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expense. As part of this plan, the Managing General Partner attempts to protect the Venture from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the Managing General partner will be able to sustain such a plan. At June 30, 1998, the Venture had cash and cash equivalents of approximately $1,088,000 compared to approximately $1,646,000 at June 30, 1997. The net decrease in cash and cash equivalents for the six months ended June 30, 1998, was approximately $1,422,000 compared to a net decrease of approximately $142,000 for the corresponding period in 1997. Net cash provided by operating activities increased during the six months ended June 30, 1998, primarily due to a decrease in net loss, as discussed above, and a decrease in net cash used in receivables and deposits resulting from a decrease in tax and insurance escrows and operating reserves. Net cash used in investing activities increased primarily due to an increase in property improvements and replacements and an increase in net deposits to restricted escrows as required by the December 1997 refinancing. Net cash used in financing activities increased due to an increase of payments on the junior loans resulting from an increase in excess cash flow at several of the Partnership's investment properties. On December 29, 1997, the Venture refinanced the mortgages encumbering all of its remaining 15 properties. The refinancing resulted in each property being encumbered by new senior and junior loans. The senior loans each have 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. The junior loans, which totaled approximately $29,449,000, each have an interest rate of 10.84% per annum and require monthly payments based on excess monthly cash flow, as defined, for each property. All of the loans mature on January 1, 2008, and the senior loans include prepayment penalties if paid prior to January 1, 2007. The senior loans retained similar terms regarding note face amounts and agreed valuation amounts. These new senior loans are recorded at the agreed valuation amount of $110,000,000, which is less than the $152,225,000 face amount of the senior loans. If the Venture defaults on the new mortgage notes payable or is unable to pay the outstanding agreed valuation amounts upon maturity, then the note face amounts become due. Accordingly, the Partnership 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 loans are cross- collateralized, but they are not cross-defaulted. At June 30, 1998, the outstanding balance of the senior and junior notes was approximately $109,517,000 and $29,773,000, respectively. 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 various properties to adequately maintain the physical assets and other operating needs of the Partnership. Such assets are currently thought to be sufficient for any near-term needs of the Partnership. No cash distributions were made by either of the Partnerships during the six months ended June 30, 1998, or during the six months ended June 30, 1997. Future cash distributions are subject to the order of distributions stipulated by the Venture's Plan of Reorganization. The source of future cash distributions is dependent upon cash generated by the Venture's properties and the cash generated through the sale or refinancing of those properties. No distributions are anticipated in 1998. Year 2000 The Venture is dependent upon the Managing General Partner and Insignia for management and administrative services. Insignia has completed an assessment and will have to modify or replace portions of its software so that its computer systems will function properly with respect to dates in the year 2000 and thereafter (the "Year 2000 Issue"). The project is estimated to be completed not later than December 31, 1998, which is prior to any anticipated impact on its operating systems. The Managing General Partner believes 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. However, if such modifications and conversions are not made, or are not completed timely, the Year 2000 Issue could have a material impact on the operations of the Venture. Other Certain items discussed in this quarterly report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act") and as such may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Venture to be materially different from any future results, performance, or achievements expressed or implied by such forward- looking statements. Such forward-looking statements speak only as of the date of this quarterly report. The Venture expressly disclaims any obligation or undertaking to release publicly any updates of revisions to any forward-looking statements contained herein to reflect any change in the Venture's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. b) Reports on Form 8-K: None filed during the quarter ended June 30, 1998. 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. Its Managing General Partner Date: August 13, 1998 By: /s/Carroll D. Vinson Carroll D. Vinson President and Director Date: August 13, 1998 By: /s/Robert D. Long, Jr. Robert D. Long, Jr. Vice President and Chief Accounting Officer VMS National Residential Portfolio II By: MAERIL, Inc. Its Managing General Partner Date: August 13, 1998 By: /s/Carroll D. Vinson Carroll D. Vinson President and Director Date: August 13, 1998 By: /s/Robert D. Long, Jr. Robert D. Long, Jr. Vice President and Chief Accounting Officer EX-27 2
5 This schedule contains summary financial information extracted from VMS National Properties Joint Venture 1998 Second Quarter 10-Q and is qualified in its entirety by reference to such 10-Q filing. 0000789089 VMS NATIONAL PROPERTIES JOINT VENTURE 1,000 6-MOS DEC-31-1998 JUN-30-1998 1,088 0 0 0 0 0 144,988 77,961 72,775 0 139,290 0 0 0 (148,058) 72,775 0 13,837 0 0 17,244 0 8,266 0 0 0 0 0 0 (3,407) (3,667) 0 Registrant has an unclassified balance sheet. Multiplier is 1.
-----END PRIVACY-ENHANCED MESSAGE-----