10-Q 1 vms.txt VMS FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________to _________ Commission file number 0-14194 VMS NATIONAL PROPERTIES JOINT VENTURE (Exact name of registrant as specified in its charter) Illinois 36-3311347 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place, PO Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (864) 239-1000 (Issuer's telephone number) Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No___ PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) VMS NATIONAL PROPERTIES JOINT VENTURE COMBINED BALANCE SHEETS (in thousands)
March 31, December 31, 2001 2000 (Unaudited) (Note) Assets: Cash and cash equivalents $ 2,603 $ 2,153 Receivables and deposits 2,015 1,743 Restricted escrows 2,969 4,279 Other assets 561 329 Investment properties: Land 13,404 13,404 Buildings and related personal property 141,085 139,698 154,489 153,102 Less accumulated depreciation (94,253) (92,727) 60,236 60,375 $ 68,384 $ 68,879 Liabilities and Partners' Deficit Liabilities Accounts payable $ 770 $ 1,245 Tenant security deposit liabilities 1,111 1,111 Accrued property taxes 768 521 Other liabilities 852 958 Accrued interest 1,070 1,071 Mortgage notes payable, including $31,183 and $31,276 due to an affiliate at March 31, 2001 and December 31, 2000 respectively 137,262 137,732 Notes payable 42,060 42,060 Deferred gain on extinguishment of debt 42,225 42,225 Partners' Deficit (157,734) (158,044) $ 68,384 $ 68,879 Note: The combined balance sheet at December 31, 2000 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 PROPERTIES JOINT VENTURE COMBINED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data)
Three Months Ended March 31, 2001 2000 Revenues: Rental income $ 7,813 $ 7,182 Other income 422 279 Total revenues 8,235 7,461 Expenses: Operating 2,405 2,007 Property management fee 326 300 General and administrative 148 144 Depreciation 1,526 1,503 Interest 3,098 3,550 Property taxes 422 454 Total expenses 7,925 7,958 Net income (loss) $ 310 $ (497) Net income (loss) allocated to general partners (2%) $ 6 $ (10) Net income (loss) allocated to limited partners (98%) 304 (487) $ 310 $ (497) Net income (loss) per limited partnership interest: Portfolio I (644 interests issued and outstanding) $ 334 $ (535) Portfolio II (267 interests issued and outstanding) $ 333 $ (536) See Accompanying Notes to Combined Financial Statements
c) VMS NATIONAL PROPERTIES JOINT VENTURE COMBINED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT (Unaudited) (in thousands)
VMS National Residential Portfolio I Limited Partners Limited General Accumulated Subscription Partners' Partners Deficit Notes Total Total Partners' deficit at December 31, 2000 $(3,536) $(107,184) $ (502) $(107,686) $(111,222) Net income for the three months ended March 31, 2001 4 215 -- 215 219 Partners' deficit at March 31, 2001 $(3,532) $(106,969) $ (502) $(107,471) $(111,003) VMS National Residential Portfolio II Limited Partners Limited General Accumulated Subscription Partners' Partners Deficit Notes Total Total Partners' deficit at December 31, 2000 $(1,480) $ (45,014) $ (328) $ (45,342) $ (46,822) Net income for the three months ended March 31, 2001 2 89 -- 89 91 Partners' deficit at March 31, 2001 $(1,478) $ (44,925) $ (328) $ (45,253) $ (46,731) Combined total $(5,010) $(151,894) $ (830) $(152,724) $(157,734) See Accompanying Notes to Combined Financial Statements
d) VMS NATIONAL PROPERTIES JOINT VENTURE COMBINED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Three Months Ended March 31, 2001 2000 Cash flows from operating activities: Net income (loss) $ 310 $ (497) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 1,526 1,503 Amortization of discounts -- 403 Change in accounts: Receivables and deposits (272) (254) Other assets (232) (134) Accounts payable 24 (328) Tenant security deposit liabilities -- (8) Accrued property taxes 247 284 Accrued interest 576 995 Other liabilities (106) (1,255) Net cash provided by operating activities 2,073 709 Cash flows from investing activities: Property improvements and replacements (1,886) (474) Net withdrawals from (deposits to) restricted escrows 1,310 (680) Net cash used in investing activities (576) (1,154) Cash flows from financing activities: Payments on mortgage notes payable (1,047) (346) Payments received on subscription notes -- 5 Net cash used in financing activities (1,047) (341) Net increase (decrease) in cash and cash equivalents 450 (786) Cash and cash equivalents at beginning of period 2,153 2,004 Cash and cash equivalents at end of period $ 2,603 $ 1,218 Supplemental disclosure of cash flow information: Cash paid for interest $ 2,522 $ 2,151 Supplemental disclosure of non-cash activity: Accrued interest added to mortgage notes payable $ 577 $ 652 Included in property improvements and replacements for the three months ended March 31, 2001 are approximately $499,000 of improvements which are included in accounts payable at December 31, 2000. See Accompanying Notes to Combined Financial Statements
e) VMS NATIONAL PROPERTIES JOINT VENTURE NOTES TO COMBINED FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited combined financial statements of VMS National Properties Joint Venture (the "Venture" or "Registrant") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of MAERIL, Inc. ("MAERIL" or the "Managing General Partner"), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2001, are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. For further information, refer to the combined financial statements and footnotes thereto included in the Venture's Annual Report on Form 10-K for the year ended December 31, 2000. The Managing General Partner is a wholly owned subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. Basis of Accounting The accompanying combined financial statements include the accounts of VMS National Residential Portfolio I ("Portfolio I"), VMS National Residential Portfolio II ("Portfolio II") and the Venture. Significant interpartnership accounts and transactions have been eliminated from these combined financial statements. Segment Reporting Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosure about Segments of an Enterprise and Related Information" established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. As defined in SFAS No. 131, the Partnership has only one reportable segment. The Managing General Partner believes that segment-based disclosures will not result in a more meaningful presentation than the combined financial statements as currently presented. Reclassifications Certain of the 2000 balances have been reclassified to conform to the 2001 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 are herein after referred to collectively as the Debtor) and excluded the 10 Subpartnerships consisting of 10 residential apartment complexes encumbered by financing insured or held by the Department of Housing and Urban Development ("HUD"), and the investing limited partnerships Portfolio I and Portfolio II. Due to the partnership agreements existing between the Venture, Portfolio I and Portfolio II, which provide the Venture with exclusive rights to the limited partner investor contributions, the Venture's initial filing was amended to reflect the Venture's right to receive any excess limited partner investor contributions. The Venture's Plan was confirmed by the Bankruptcy Court in March 1993 and became effective on March 31, 1993 (the "Effective Date"). During 1997, the Plan was modified in order to allow the Venture to refinance the debt encumbering its properties. The bankruptcy plan was closed by the Bankruptcy Court on April 29, 1998. The Primary aspects of the Venture's Plan of Reorganization included the following: (a) The Venture retained 17 properties from the existing portfolio (the "retained properties"), and abandoned title of the remaining properties (the "non-retained properties") to the Federal Deposit Insurance Corporation (the "FDIC"). The retained properties consisted of one HUD property and 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 (the "Senior Debt") was refinanced on December 29, 1997. (c) As it pertained to the existing BH junior mortgages on the retained properties, the FDIC reduced its claim on two of the properties to $300,000 per property evidenced by a non-interest bearing note scheduled to mature January 15, 2001, 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 commencing with the first monthly payment due thereafter. (The retained property governed by a HUD Regulatory Agreement made payments of interest only following the approval by HUD of the Surplus Cash calculation.) On October 28, 1995, the FDIC sold all of the debt it held related to the retained properties to BlackRock Capital Finance, L.P. The debt amounts and terms were not modified. On December 29, 1997, all of the junior mortgages (the "Junior Debt") were refinanced. (d) The Venture distributed the following amounts in conjunction with the terms of the Plan: (1) approximately $5,980,000 to satisfy unsecured prepetition creditor claims of the nonaffiliated note payable to Security Pacific National Bank, trade creditors, and property taxes on the retained properties; (2) approximately $1,056,000 to provide for allowed and unclassified administrative claims; and (3) approximately $5,960,000 to make capital improvements at the retained properties. This capital improvement reserve was exhausted during 1995. (e) The VMS/Stout Joint Venture (the "VMS/Stout Venture") was formed pursuant to an agreement dated August 18, 1984, which was amended and restated on October 4, 1984. VMS Realty Partners has a 50% interest and affiliates of the Seller (as defined below) have a 50% interest in the VMS/Stout Venture. The VMS/Stout Venture, the J.D. Stout Company ("Stout") and certain affiliates of Stout entered into a contract of sale dated August 18, 1984, which was amended on October 4, 1984. The contract provided for the sale by Stout and other owners (collectively the "Seller") of the 51 residential apartment complexes to the VMS/Stout Venture. The VMS/Stout Venture assigned its interest as purchaser to the Venture. During 1987, Stout assigned its interest in the VMS/Stout Joint Venture to ContiTrade Service Corporation ("ContiTrade"). On November 17, 1993, VMS Realty Partners assigned its interest in the VMS/Stout Joint Venture to the Partners Liquidating Trust. The VMS/Stout Joint Venture was granted an allowed claim in the amount of $49,535,000 for the Assignment and Long-Term Loan Arrangement Notes payable to them by the Venture. Payments totaling $3,475,000 in conjunction with this allowed claim were made to the nonaffiliated members of the VMS/Stout Joint Venture on October 7, 1993. The Venture also executed a $4,000,000 promissory note dated September 1, 1993, to ContiTrade Service Corporation (the "ContiTrade Note") in connection with these allowed note claims. The ContiTrade Note represents a prioritization of payments to ContiTrade of the first $4,000,000 in repayments made under the existing Assignment and Long-Term Arrangement Notes payable to the VMS/Stout Joint Venture, and does not represent an additional $4,000,000 claim payable to ContiTrade. In addition to prioritizing ContiTrade's receipt of the first $4,000,000 of repayments on the old notes, the ContiTrade Note provides for 5% non-compounding interest on the outstanding principal balance calculated daily on the basis of a 360 day year. The ContiTrade Note was secured by a Deed of Trust, Assignment of Rents and Security Agreement on each of the Venture's retained properties, and provided ContiTrade with other approval rights as to the ongoing operations of the Venture's retained properties. The ContiTrade Note, which was scheduled to mature January 15, 2001, 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 ("Insignia"). Effective October 1, 1993, Insignia took over the asset management of the Venture's retained properties and partnership functions for the Venture. The rights provided to Insignia were transferred to AIMCO upon the merger of these entities in October 1998. The Revised Asset Management Agreement provided for an annual compensation of $500,000 to be paid to AIMCO in equal monthly installments. In addition, AIMCO received reimbursement for all accountable expense incurred in connection with its services up to $200,000 per calendar year. These amounts are to be paid from the available operating cash flow of the Venture's retained complexes after the payment of operating expenses and priority reserve funding for insurance, real estate and personal property taxes and senior and junior mortgage payments. If insufficient operating cash flow exists after the funding of these items, the balance of asset management fees and reimbursements may be paid from available partnership cash sources. Additionally, the asset management fee payable will be reduced proportionately for each of the Venture's retained complexes which are sold or otherwise disposed of from time to time. Accordingly, the fee was reduced upon the disposition of Bellevue and Carlisle Square in 1996. Effective January 1, 1998, in relation to the refinancing of the Senior Debt on December 29, 1997 (see "Note D"), the Venture and Managing General Partner agreed to amend the Asset Management Agreement to reduce the annual asset management fee payable to $300,000 per year and to reduce the annual reimbursement for accountable expenses to $100,000. Note 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 Subpartnership activities. The Revised Asset Management Agreement, which was executed in conjunction with the Venture's Plan, provided for (i) certain payments to affiliates for real estate advisory services and asset management of the Venture's retained properties for an annual compensation of $300,000 and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Venture up to $100,000 per annum. Asset management fees of approximately $75,000 were paid to affiliates of the Managing General Partner for both of the three months ended March 31, 2001 and 2000. These fees are included in general and administrative expenses. Affiliates of the Managing General Partner are entitled to receive a percentage of the gross receipts from all of the Registrant's properties as compensation for providing property management services. The Registrant paid to such affiliates approximately $326,000 and $300,000 for the three months ended March 31, 2001 and 2000, respectively. These fees are included in operating expenses. In addition, affiliates of the Managing General Partner received reimbursement of accountable administrative expenses amounting to approximately $25,000 for each of the three month periods ended March 31, 2001 and 2000. These expenses are included in general and administrative expenses. An affiliate of the Managing General Partner received bookkeeping reimbursements in the amount of approximately $31,000 and $36,000 for three months ended March 31, 2001 and 2000, respectively. These expenses are included in operating expense. Prepetition property management fees were approved by the Bankruptcy Court for payment to a former affiliate. This allowed claim may be paid only from available Venture cash. At March 31, 2001 and December 31, 2000, the outstanding balance of $79,000 is included in other liabilities. Certain affiliates of the former general partners and the VMS/Stout Venture may be entitled to receive various fees upon disposition of the properties. These fees will be paid from the disposition proceeds and are subordinated to the distributions required by the Plan. There were no property dispositions for which proceeds were received during the three months ended March 31, 2001 and 2000. AIMCO Properties LP, which owns the Managing General Partner and which is a controlled affiliate of AIMCO, purchased (i) the junior loans on November 19, 1999, and (ii) a significant interest in the residual value of the properties on November 16, 1999. These transactions occurred between AIMCO LP and an unrelated third party and thus had no effect on the combined financial statements of the Venture. Residual Value is defined as the amount remaining from a sale of the Partnerships' investment properties or refinancing of the mortgages encumbering such investment properties after repayment of: (i) senior loans, plus accrued interest; (ii) junior loans, plus accrued interest; (iii) The Assignment Note (as defined), plus accrued interest; and (iv) $13,000,000 advance to the Partnerships. Fifty percent of the Residual Value is to be paid to AIMCO LP with the remainder being used to first repay other liabilities of the Partnerships and second, returned to the investors. Based upon information currently available to the Managing General Partner, it is anticipated that there will be no residual proceeds upon a sale or refinancing of the investment properties; therefore, no liability has been recognized in the combined balance sheets. However, future circumstances may require such a liability to be recognized. As a result of tender offers, AIMCO and its affiliates currently own 39.75 units of limited partnership interest in Portfolio I representing 6.17% of the outstanding limited partnership interests, along with the 2% general partner interest for a combined ownership in Portfolio I of 8.17%. AIMCO and its affiliates currently own 31.5 units of limited partnership interest in Portfolio II representing 11.80% of the outstanding limited partnership interests, along with the 2% general partner interest for a combined ownership in Portfolio II of 13.80%. The Venture is owned 70.69% by Portfolio I and 29.31% by Portfolio II which results in AIMCO and its affiliates currently owning 9.82% of the Venture. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnerships for cash or in exchange for units in the operating partnership of AIMCO. Under the Partnership Agreements, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters, which would include without limitation, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the Managing General Partner because of its affiliation with the Managing General Partner. Note D - Mortgage Notes Refinanced 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. The junior loans each have an interest rate of 10.84% per annum and require monthly payments based on excess monthly cash flow for each property. Per the junior loan agreements, excess monthly cash flow is defined as revenue generated from operation of a property less (1) operating expenses of the property, (2) the debt service payment for the senior loans, (3) the tax and insurance reserve deposit and (4) replacement reserve deposit. Pursuant to agreements signed for each of the Venture's investment properties with the holder of the Senior Loans, the properties' excess monthly cash flows are first to be used to fund repair reserves. Once that reserve is fully funded, the excess monthly cash flow will be used as payment towards the junior loans. As of December 31, 2000, these reserves were fully funded and the excess monthly cash flow is now used as payment toward the junior loans. 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 loans were recorded at the agreed valuation amount of $110,000,000, which was 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. The junior loans were recorded at their face amount at the time of the refinancing and are being accounted for under the terms of their note agreements. Accordingly, the Venture deferred recognition of a gain of $42,225,000, which is the difference between the refinanced note face amounts and the agreed valuation amounts. All the loans are cross-collateralized, but they are not cross-defaulted. Therefore, a default by one property under the terms of its loan agreement does not in and of itself create a default under all of the senior and junior loan agreements. However, if the proceeds upon the sale or refinancing of any property are insufficient to fully repay the outstanding senior and junior loans related to that property, any deficiency is to be satisfied from the sale or refinancing of the remaining properties. In conjunction with the refinancing, the Venture paid the outstanding principal and accrued interest on the $4,000,000 ContiTrade Note (see "Note E"). Note E - Notes Payable Assignment Note The Venture executed a $29,000,000 purchase money subordinated note (the "Assignment Note") payable to the VMS/Stout Venture in exchange for the assignment by the VMS/Stout Venture of its interest in the contract of sale to the Venture. The Assignment Note is collateralized by the pledge from Portfolio I and Portfolio II of their respective interests in the Venture. On November 17, 1993, VMS Realty Partners assigned its 50% interest in the VMS/Stout Venture to the Partners Liquidating Trust which was established for the benefit of the former creditors of VMS Realty Partners and its affiliates. The stated rate of interest on the Assignment Note (prior to modification by the Plan) was 12% per annum (compounded semi-annually) with monthly payments of interest only at a rate of 6%. Monthly payments on this note were discontinued in May 1990, and the accrual of interest was discontinued after the February 22, 1991 petition filing date. Additionally, effective April 10, 1991, VMS Realty Partners waived its right to collect interest on its portion of the Assignment Note. Pursuant to the Plan, the allowed claim for the Assignment Note and related interest was $46,285,000; $3,475,000 of this amount was paid in October 1993, in accordance with the terms of the Plan. The Venture also executed a $4,000,000 promissory note payable dated September 1, 1993 to ContiTrade Services Corporation ("ContiTrade Note") with interest at 5% per annum. This note represented a prioritization of payment to ContiTrade and did not represent the assumption of any additional debt. The ContiTrade Note was to mature on January 15, 2000, and was collateralized by a Deed of Trust, Assignment of Rents and Security Agreement on each of the Venture's retained complexes. This note was paid with the December 29, 1997, refinancing (see "Note D"). The remaining $38,810,000 of the Assignment Note is non-interest bearing and is payable only after payment of debt of higher priority, including the senior and junior mortgage notes payable. Pursuant to SOP 90-7, the Assignment Note, the Long-Term Loan Arrangement Fee Note (as defined below) and related accrued interest were adjusted to the present value of amounts to be paid using an estimated current interest rate of 11.5%. At March 31, 2001, the carrying amount of the Assignment Note is $38,810,000. Interest expense was recognized through the amortization of the discount over the estimated term of the note which became fully amortized as of January 2000. Long-Term Loan Arrangement Fee Note The Venture executed a $3,000,000 unsecured, nonrecourse promissory note, the "Long-Term Loan Arrangement Fee Note" payable to the VMS/Stout Venture as consideration for arranging long-term financing. The stated rate of interest on this note prior to modification by the Plan was 10% per annum, payable on a monthly basis. Monthly interest payments on this Note were discontinued in May 1990. Additionally, the accrual of interest on this Note was discontinued after the February 22, 1991 petition filing date. Pursuant to the Plan, the entire $3,250,000 balance, which included $250,000 in unpaid accrued interest that was added to the principal, was granted as an allowed claim. None of this balance bears interest, and the balance is payable only after debt of a higher priority, including senior and junior mortgage loans. Note F - Legal Proceedings The Venture is not aware of any pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The matters discussed in this Form 10-Q contain certain forward-looking statements and involve risks and uncertainties (including changing market conditions, competitive and regulatory matters, etc.) detailed in the disclosures contained in this Form 10-Q and the other filings with the Securities and Exchange Commission made by the Registrant from time to time. The discussion of the Registrant's business and results of operations, including forward-looking statements pertaining to such matters, does not take into account the effects of any changes to the Registrant's business and results of operation. Accordingly, actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. Average occupancy rates for the three months ended March 31, 2001 and 2000, for all of the Venture's properties are as follows: Average Occupancy Property 2001 2000 North Park Apartments Evansville, IN 88% 91% Chapelle Le Grande Merrillville, IN 94% 96% Terrace Gardens Omaha, NE 93% 95% Forest Ridge Apartments Flagstaff, AZ 98% 97% Scotchollow San Mateo, CA 98% 98% Pathfinder Fremont, CA 98% 99% Buena Vista Apartments Pasadena, CA 92% 97% Mountain View Apartments San Dimas, CA 97% 97% Crosswood Park Citrus Heights, CA 97% 95% Casa de Monterey Norwalk, CA 95% 98% The Bluffs Milwaukie, OR 94% 94% Watergate Apartments Little Rock, AR 96% 89% Shadowood Apartments Monroe, LA 96% 90% Vista Village Apartments El Paso, TX 88% 91% The Towers of Westchester Park College Park, MD 98% 96% The Managing General Partner attributes the occupancy fluctuations at the properties to the following: a decrease at North Park Apartments due to many tenants purchasing homes and competition from new complexes; a decrease at Buena Vista Apartments due to market competition and tenants purchasing homes; a decrease at Casa De Monterrey to move outs for first time home buyers; an increase at Watergate Apartments due to hiring of a knowledgeable and experienced staff; an increase at Shadowood Apartments due to the completion of an external rehabilitation project; and a decrease at Vista Village Apartments due to higher evictions for non-paying tenants. Results of Operations The Venture recorded net income for the three months ended March 31, 2001 of approximately $310,000 as compared to a net loss of approximately $497,000 for the corresponding period in 2000. The increase in net income is primarily attributable to an increase in total revenues and a decrease in total expenses. The increase in total revenues is primarily due to an increase in rental income and other income. Rental income increased mainly due to an increase in the average rental rates at all properties and occupancy increases at five of the properties. This was offset by occupancy decreases at seven of the properties. Other income increased due to an increase in interest income, furnished unit apartment income, cleaning and damage fees, and laundry revenue. Total expenses decreased primarily due to a reduction in interest expense which more than offset the increases in operating and depreciation expense. Interest expense decreased due to a reduction in the amortization of the imputed interest on the Venture's Assignment Note. This discount became fully amortized during January 2000 which was the estimated maturity date of the Assignment Note. Operating expense increased due to increased salaries and related employee benefits. In addition, there was an increase in utilities, especially natural gas, due to price increases. Depreciation expense increased due to property additions during the past twelve months. Included in general and administrative expenses for the three months ended March 31, 2001 and 2000 are reimbursements to the Managing General Partner allowed under the Partnership Agreement associated with its management of the Venture. Costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement are also included. As part of the ongoing business plan of the Venture, the Managing General Partner monitors the rental market environment of each of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Venture from increases in expenses. As part of this plan, the Managing General Partner attempts to protect the Venture from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the Managing General Partner will be able to sustain such a plan. Liquidity and Capital Resources At March 31, 2001, the Venture had cash and cash equivalents of approximately $2,603,000 as compared to approximately $1,218,000 at March 31, 2000. Cash and cash equivalents increased approximately $450,000 for the three months ended March 31, 2001, from December 31, 2000. The increase in cash and cash equivalents is a result of approximately $2,073,000 of cash provided by operating activities which was partially offset by approximately $1,047,000 and $576,000 of cash used in financing and investing activities, respectively. Cash used in financing activities consisted of principal payments on the mortgages encumbering the investment properties. Cash used in investing activities consisted of property improvements and replacements partially offset by net withdrawals from restricted escrow accounts. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the properties to adequately maintain the physical assets and other operating needs of the Venture and to comply with Federal, state and local legal and regulatory requirements. Capital improvements planned for each of the Venture's properties are detailed below. The Venture is restricted to annual capital improvements of $300 per unit for all of the properties, which is the limit set by the Junior Debt for funding of capital improvements. The Venture, the holder of the Junior Debt encumbering the properties and the servicer of the Senior Debt encumbering the properties have agreed to a procedure to assess whether or not capital expenditures, in addition to those permitted under the $300 per unit limit, are needed at the properties and the methodology for funding any such capital expenditures. The parties agreed upon the required capital expenditures and that these costs would be funded out of the cash flows from the properties that otherwise would be utilized to pay debt service on the Junior Debt. As a result, the balloon payment due on the Junior Debt may be higher at their maturity in January 2008 as accrued but unpaid interest is rolled into the principal balance. North Park Apartments: The methodology discussed above for funding the required capital expenditures has been applied to North Park Apartments. The parties agreed that this property required capital expenditures which are to be completed by June 30, 2001 and which were estimated to cost approximately $150,000, of which approximately $121,000 ($31,000 in the first quarter) has been completed as of March 31, 2001. These costs were to be funded out of cash flows from the properties that otherwise would be utilized to pay debt service on the junior debt. As of March 31, 2001, this amount has been fully funded. In addition, approximately $211,000 is budgeted for capital improvements for the year ending December 31, 2001. The Venture completed approximately $62,000 in capital expenditures, including the aforementioned capital expenditures, at North Park Apartments during the three months ended March 31, 2001, consisting primarily of plumbing fixtures, floor coverings, roof replacements and major landscaping. These improvements were funded from operating cash flow and replacement reserves. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Chapelle Le Grande: The methodology discussed above for funding the required capital expenditures has been applied to Chapelle Le Grande. The parties agreed that this property required capital expenditures which are to be completed by June 30, 2001 and which were estimated to cost approximately $90,000, of which approximately $49,000 (approximately $10,000 in the first quarter) has been completed as of March 31, 2001. These costs were to be funded out of cash flows from the properties that otherwise would be utilized to pay debt service on the junior debt. As of March 31, 2001, this amount has been fully funded. In addition, approximately $29,000 is budgeted for capital improvements for the year ending December 31, 2001. The Venture completed approximately $40,000 in capital expenditures, including the aforementioned capital expenditures, at Chapelle Le Grande during the three months ended March 31, 2001, consisting primarily of roof replacements, structural improvements, electrical upgrades and floor covering replacements. These improvements were funded from operating cash flow and replacement reserves. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Terrace Gardens: The methodology discussed above for funding the required capital expenditures has been applied to Terrace Gardens. The parties agreed that this property required capital expenditures which are to be completed by June 30, 2001 and which were estimated to cost approximately $433,000, none of which were completed as of March 31, 2001. These costs were to be funded out of cash flows from the properties that otherwise would be utilized to pay debt service on the junior debt. As of March 31, 2001, this amount has been fully funded. In addition, approximately $418,000 is budgeted for capital improvements for the year ending December 31, 2001. The Venture completed approximately $29,000 in capital expenditures at Terrace Gardens during the three months ended March 31, 2001, consisting primarily of floor coverings, plumbing upgrades and structural improvements. These improvements were funded from operating cash flow and replacement reserves. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Forest Ridge Apartments: The methodology discussed above for funding the required capital expenditures has been applied to Forest Ridge Apartments. The parties agreed that this property required capital expenditures which are to be completed by June 30, 2001 and which were estimated to cost approximately $296,000, of which approximately $265,000 (none during the first quarter) has been completed as of March 31, 2001. These costs were to be funded out of cash flows from the properties that otherwise would be utilized to pay debt service on the junior debt. As of March 31, 2001, this amount has been fully funded. In addition, approximately $97,000 is budgeted for capital improvements for the year ending December 31, 2001. The Venture completed approximately $20,000 in capital expenditures at Forest Ridge Apartments during the three months ended March 31, 2001, consisting primarily of floor coverings, major landscaping, office equipment and appliances. These improvements were funded from operating cash flow and replacement reserves. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Scotchollow: The methodology discussed above for funding the required capital expenditures has been applied to Scotchollow. The parties agreed that this property required capital expenditures which are to be completed by June 30, 2001 and which were estimated to cost approximately $759,000, of which approximately $465,000 (none in the first quarter) has been completed as of March 31, 2001. These costs were to be funded out of cash flows from the properties that otherwise would be utilized to pay debt service on the junior debt. As of March 31, 2001, this amount has been fully funded. In addition, approximately $619,000 is budgeted for capital improvements for the year ending December 31, 2001. The Venture completed approximately $168,000 in capital expenditures at Scotchollow during the three months ended March 31, 2001, consisting primarily of parking lot improvements and floor coverings. These improvements were funded from operating cash flow and replacement reserves. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Pathfinders Village: The methodology discussed above for funding the required capital expenditures has been applied to Pathfinders Village. The parties agreed that this property required capital expenditures which are to be completed by June 30, 2001 and which were estimated to cost approximately $1,369,000, of which approximately $1,095,000 ($250,000 in the first quarter) has been completed as of March 31, 2001. These costs were to be funded out of cash flows from the properties that otherwise would be utilized to pay debt service on the junior debt. As of March 31, 2001, this amount has been fully funded. In addition, approximately $568,000 is budgeted for capital improvements for the year ending December 31, 2001. The Venture completed approximately $327,000 in capital expenditures, including the aforementioned capital expenditures, at Pathfinders Village during the three months ended March 31, 2001, consisting primarily of structural improvements, floor coverings, plumbing fixtures and appliances. These improvements were funded from operating cash flow and replacement reserves. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Buena Vista Apartments: The methodology discussed above for funding the required capital expenditures has been applied to Buena Vista Apartments. The parties agreed that this property required capital expenditures which are to be completed by June 30, 2001 and which were estimated to cost approximately $175,000, approximately $44,000 (all in the first quarter) of which were completed as of March 31, 2001. These costs were to be funded out of cash flows from the properties that otherwise would be utilized to pay debt service on the junior debt. As of March 31, 2001, this amount has been fully funded. In addition, approximately $107,000 is budgeted for capital improvements for the year ending December 31, 2001. The Venture completed approximately $44,000 in capital expenditures at Buena Vista Apartments during the three months ended March 31, 2001, consisting primarily of structural improvements, appliances, recreational facilities and floor coverings. These improvements were funded from operating cash flow and replacement reserves. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Mountain View Apartments: The methodology discussed above for funding the required capital expenditures has been applied to Mountain View Apartments. The parties agreed that this property required capital expenditures which are to be completed by June 30, 2001 and which were estimated to cost approximately $234,000, of which approximately $81,000 ($13,000 in the first quarter) has been completed as of March 31, 2001. These costs were to be funded out of cash flows from the properties that otherwise would be utilized to pay debt service on the junior debt. As of March 31, 2001, this amount has been fully funded. In addition, approximately $55,000 is budgeted for capital improvements for the year ending December 31, 2001. The Venture completed approximately $19,000 in capital expenditures, including the aforementioned capital expenditures, at Mountain View Apartments during the three months ended March 31, 2001, consisting primarily of floor coverings and structural improvements. These improvements were funded from operating cash flow and replacement reserves. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Crosswood Park: The methodology discussed above for funding the required capital expenditures has been applied to Crosswood Park. The parties agreed that this property required capital expenditures which are to be completed by June 30, 2001 and which were estimated to cost approximately $301,000, of which approximately $222,000 (none in the first quarter) has been completed as of March 31, 2001. These costs were to be funded out of cash flows from the properties that otherwise would be utilized to pay debt service on the junior debt. As of March 31, 2001, this amount has been fully funded. In addition, approximately $300,000 is budgeted for capital improvements for the year ending December 31, 2001. The Venture completed approximately $266,000 in capital expenditures at Crosswood Park during the three months ended March 31, 2001, consisting primarily of structural improvements, floor coverings and appliances. These improvements were funded from operating cash flow and replacement reserves. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Casa de Monterey: The methodology discussed above for funding the required capital expenditures has been applied to Casa de Monterey. The parties agreed that this property required capital expenditures which are to be completed by June 30, 2001 and which were estimated to cost approximately $378,000, of which approximately $281,000 ($118,000 in the first quarter) has been completed as of March 31, 2001. These costs were to be funded out of cash flows from the properties that otherwise would be utilized to pay debt service on the junior debt. As of March 31, 2001, this amount has been fully funded. In addition, approximately 83,000 is budgeted for capital improvements for the year ending December 31, 2001. The Venture completed approximately $119,000 in capital expenditures, including the aforementioned capital expenditures, at Casa de Monterey during the three months ended March 31, 2001, consisting primarily of building improvements, floor coverings, cabinets, appliances and structural improvements. These improvements were funded from operating cash flow and replacement reserves. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. The Bluffs: The methodology discussed above for funding the required capital expenditures has been applied to The Bluffs. The parties agreed that this property required capital expenditures which are to be completed by June 30, 2001 and which were estimated to cost approximately $52,000, none of which were completed as of March 31, 2001. These costs were to be funded out of cash flows from the properties that otherwise would be utilized to pay debt service on the junior debt. As of March 31, 2001 this amount has been fully funded. In addition, approximately $83,000 is budgeted for capital improvements for the year ending December 31, 2001. The Venture completed approximately $19,000 in capital expenditures at The Bluffs during the three months ended March 31, 2001, consisting primarily of parking area improvements, floor coverings and structural enhancements. These improvements were funded from operating cash flow and replacement reserves. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Watergate Apartments: The methodology discussed above for funding the required capital expenditures has been applied to Watergate Apartments. The parties agreed that this property required capital expenditures which are to be completed by June 30, 2001 and which were estimated to cost approximately $186,000, none of which were completed as of March 31, 2001. These costs were to be funded out of cash flows from the properties that otherwise would be utilized to pay debt service on the junior debt. As of March 31, 2001, this amount has been fully funded. In addition, approximately $132,000 is budgeted for capital improvements for the year ending December 31, 2001. The Venture completed approximately $20,000 in capital expenditures at Watergate Apartments during the three months ended March 31, 2001, consisting primarily of structural improvements, plumbing fixtures and floor coverings. These improvements were funded from operating cash flow and replacement reserves. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Shadowood Apartments: The methodology discussed above for funding the required capital expenditures has been applied to Shadowood Apartments. The parties agreed that this property required capital expenditures which are to be completed by June 30, 2001 and which were estimated to cost approximately $151,000, of which approximately $148,000 (none in the first quarter) has been completed as of March 31, 2001. These costs were to be funded out of cash flows from the properties that otherwise would be utilized to pay debt service on the junior debt. As of March 31, 2001, this amount has been fully funded. In addition, approximately $115,000 is budgeted for capital improvements for the year ending December 31, 2001. The Venture completed approximately $130,000 in capital expenditures at Shadowood Apartments during the three months ended March 31, 2001, consisting primarily of parking lot improvements, structural upgrades and plumbing improvements. These improvements were funded from operating cash flow and replacement reserves. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Vista Village Apartments: The methodology discussed above for funding the required capital expenditures has been applied to Vista Village Apartments. The parties agreed that this property required capital expenditures which are to be completed by June 30, 2001 and which were estimated to cost approximately $264,000, of which approximately $126,000 ($35,000 in the first quarter) has been completed as of March 31, 2001. These costs were to be funded out of cash flows from the properties that otherwise would be utilized to pay debt service on the junior debt. As of March 31, 2001, this amount has been fully funded. In addition, approximately $287,000 is budgeted for capital improvements for the year ending December 31, 2001. The Venture completed approximately $49,000 in capital expenditures, including the aforementioned capital expenditures, at Vista Village Apartments during the three months ended March 31, 2001, consisting primarily of major landscaping, parking lot upgrades, floor coverings and appliances. These improvements were funded from operating cash flow and replacement reserves. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Towers of Westchester Park: The methodology discussed above for funding the required capital expenditures has been applied to Towers of Westchester Park. The parties agreed that this property required capital expenditures during 2000 which were estimated to cost approximately $920,000, all of which were completed as of December 31, 2000. These costs were funded out of cash flows from the properties that otherwise would have been utilized to pay debt service on the junior debt. In addition, approximately $83,000 is budgeted for capital improvements for the year ending December 31, 2001. The Venture completed approximately $76,000 in capital expenditures at Towers of Westchester Park during the three months ended March 31, 2001, consisting primarily of heating and air conditioning upgrades, recreational facility improvements, floor coverings and plumbing fixtures. These improvements were funded from operating cash flow and replacement reserves. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. The Venture has budgeted a minimum of $846,187 ($275 per unit or $814,275 plus $31,912 special approval) for all of the properties which is less than the limit set by the second mortgage notes for funding of capital improvements. As the Venture identifies properties which require additional improvements discussions are held with the holders of both the first and second mortgage notes for approval to perform agreed upon capital improvements. The Registrant's current assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Registrant. The Senior Debt encumbering all of the properties totals approximately $106,079,000 and is being amortized over 25 years, with a balloon payment of $91,352,000 due January 2008. The Junior Debt, which also matures January 2008, totals approximately $31,183,000 and requires monthly payments based upon monthly excess cash flow for each property. The Assignment Note and Long-Term Arrangement Fee Notes totaling approximately $42,060,000 are non-interest bearing and are subordinate to the Senior and Junior Debt. AIMCO LP, which owns the Managing General Partner and which is a controlled affiliate of AIMCO, purchased (i) the junior debt on November 19, 1999, and (ii) a significant interest in the residual value of the properties on November 16, 1999. AIMCO LP, the Venture, and the servicer of the senior debt encumbering the properties (the "Servicer") agreed to a procedure to assess whether or not capital expenditures in addition to permitted capital expenditures of $300 per unit per year are needed at each property and the methodology for funding any such capital expenditures. Capital expenditures that are identified pursuant to these procedures likely will be funded out of cash flow from the properties that otherwise would be used to service the junior debt on the properties; longer term capital expenditures so identified likely will be funded through an increase in required capital expenditure reserve funding. Although the effect of such additional capital expenditures, and the funding therefore, cannot be determined with precision at this time, the Venture anticipates that the additional capital expenditures at the properties identified pursuant to the procedures described above, and the funding therefore, will significantly increase the period of time that it takes to amortize the junior debt, may cause the junior loans to negatively amortize for some period of time, and may result in balloon payments due on the junior debt at the end of the term. If the properties cannot be refinanced or sold at or before the end of such term for a sufficient amount, the Venture will risk losing such properties through foreclosure. There can be no assurance of the effect that such additional capital expenditures, and the funding therefor, will have on the operations of the properties, or whether the properties will be maintained in the future in an acceptable or marketable state of repair. There were no cash distributions to the partners of either of the Partnerships for the three months ended March 31, 2001 and 2000. In accordance with the respective Agreements of Limited Partnership, there are no material restrictions on the Partnerships' ability to make cash distributions. Future cash distributions are subject to the order of distributions as stipulated by Venture's Plan of Reorganization. The source of future distributions will depend upon the levels of net cash generated from operations, the availability of cash reserves, and timing of debt maturities, refinancings and/or property sales. The Partnerships' distribution policies are reviewed on a quarterly basis. There can be no assurance that the Partnerships will generate sufficient funds from operations, after required capital expenditures and the order of distributions as stipulated by the Venture's Plan of Reorganization, to permit any distributions to partners during the remainder of 2001 or subsequent periods. As a result of tender offers, AIMCO and its affiliates currently own 39.75 units of limited partnership interest in Portfolio I representing 6.17% of the outstanding limited partnership interests, along with the 2% general partner interest for a combined ownership in Portfolio I of 8.17%. AIMCO and its affiliates currently own 31.5 units of limited partnership interest in Portfolio II representing 11.80% of the outstanding limited partnership interests, along with the 2% general partner interest for a combined ownership in Portfolio II of 13.80%. The Venture is owned 70.69% by Portfolio I and 29.31% by Portfolio II which results in AIMCO and its affiliates currently owning 9.82% of the Venture. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnerships for cash or in exchange for units in the operating partnership of AIMCO. Under the Partnership Agreements, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters, which would include without limitation, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the Managing General Partner because of its affiliation with the Managing General Partner. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Venture is exposed to market risks from adverse changes in interest rates. In this regard, changes in U.S. interest rates affect the interest earned on the Venture's cash and cash equivalents as well as interest paid on its indebtedness. As a policy, the Venture does not engage in speculative or leveraged transactions, nor does it hold or issue financial instruments for trading purposes. The Venture is exposed to changes in interest rates primarily as a result of its borrowing activities used to maintain liquidity and fund business operations. To mitigate the impact of fluctuations in U.S. interest rates, the Venture maintains its debt as fixed rate in nature by borrowing on a long-term basis. Based on interest rates at March 31, 2001, a 100 basis point increase or decrease in market interest rate would not have a material impact on the Venture's Senior or Junior Debt. The Managing General Partner considers estimation of the fair value for the Assignment and Long-Term Arrangement Fee Notes Payable to be impracticable as there is currently no market in which the Venture could obtain similar financing. The following table summarizes the Venture's Senior and Junior Debt obligations at March 31, 2001. The interest rates represent the weighted-average rates. The fair value of the debt obligations approximated the recorded value as of March 31, 2001. Long-term Debt Principal Weighted-average (in thousands) Interest Rate 2001 $ 966 8.50% 2002 1,565 8.50% 2003 1,705 8.50% 2004 1,832 8.50% 2005 2,022 8.50% Thereafter 129,172 9.07% $137,262 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit 11, Calculation of Net Income (Loss) Per Investor. b) Reports on Form 8-K: None filed during the quarter ended March 31, 2001. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VMS NATIONAL PROPERTIES JOINT VENTURE (Registrant) VMS National Residential Portfolio I By: MAERIL, Inc. Managing General Partner By: /s/Patrick J. Foye Patrick J. Foye Executive Vice President By: /s/Martha L. Long Martha L. Long Senior Vice President and Controller VMS National Residential Portfolio II By: MAERIL, Inc. Managing General Partner By: /s/Patrick J. Foye Patrick J. Foye Executive Vice President By: /s/Martha L. Long Martha L. Long Senior Vice President and Controller Date: Exhibit 11 VMS NATIONAL PROPERTIES JOINT VENTURE CALCULATION OF NET INCOME (LOSS) PER INVESTOR (in thousands, except unit data) For the Three Months Ended March 31, 2001 2000 VMS National Properties net income (loss) $ 310 $ (496) Portfolio I net (loss) income -- (1) Portfolio II net loss -- -- Combined net income (loss) $ 310 $ (497) Portfolio I allocation: 70.69% $ 219 $ (350) -- (1) $ 219 $ (351) Net income (loss) to general partner (2%) $ 4 $ (7) Net income (loss) to limited partners (98%) $ 215 $ (344) Number of Limited Partner units 644 644 Net income (loss) per limited partnership interest $ 334 $ (535) Portfolio II allocation: 29.31% $ 91 $ (146) -- -- $ 91 $ (146) Net income (loss) to general partner (2%) $ 2 $ (3) Net income (loss) to limited partners (98%) $ 89 $ (143) Number of Limited Partner units 267 267 Net income (loss) per limited partnership interest $ 333 $ (356)