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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the quarterly period ended March 31, 1997
or
( ) Transition Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the transition period from to
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Commission File Number 0-14956
VMS National Hotel Partners
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(Exact name of registrant as specified in its charter)
Illinois 36-3370590
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
630 Dundee Road, Suite 220, Northbrook, Illinois 60062
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(Address of principal executive offices) (Zip Code)
(847)714-9600
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(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 .
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PART I
Item 1.
VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
COMBINED BALANCE SHEETS
(UNAUDITED)
ASSETS
March 31, 1997 December 31, 1996
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Cash and cash equivalents $ 670,103 $ 847,399
Interest receivable 29,664 29,664
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Total assets $ 699,767 $ 877,063
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LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
LIABILITIES
Other accounts payable and accrued expenses:
Affiliates $ 8,977 $ 1,919
Nonaffiliates --- 97,333
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Total liabilities 8,977 99,252
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Partners' capital (deficit)
General Partners (685,044) (684,087)
Limited Partners:
Portfolio I - 514 Interests 911,731 980,393
Portfolio II - 135 Interests 464,103 481,505
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Total partners' capital (deficit) 690,790 777,811
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Total liabilities and partners' capital (deficit) $ 699,767 $ 877,063
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The accompanying notes are an integral part of the combined financial
statements.
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VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 and 1996
(UNAUDITED)
HOTEL OPERATIONS 1997 1996
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Revenues:
Rooms $ -- $ 14,158,123
Food and beverage -- 3,765,252
Telephone -- 780,118
Other -- 772,758
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Total hotel revenues -- 19,476,251
Direct costs and expenses:
Rooms -- 3,665,362
Food and beverage -- 3,084,337
Telephone -- 720,439
Other -- 509,324
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Total direct hotel costs and expenses -- 7,979,462
Unallocated expenses:
Administrative and general -- 2,178,482
Management fees -- 433,261
Marketing -- 1,851,306
Energy -- 906,353
Property operations and maintenance -- 942,002
Property taxes and insurance -- 829,102
Rent -- 270,008
Mortgage interest expense -- 5,546,081
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Total unallocated expenses -- 12,956,595
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Loss from hotel operations -- (1,459,806)
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PARTNERSHIP OPERATIONS
Revenues:
Interest on subscription notes -- 2,305
Interest on temporary investments 9,144 15,428
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Total partnership revenues 9,144 17,733
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Expenses:
Managing General Partners' fees 50,000 325,141
Professional, consulting and other fees:
Affiliates 17,096 70,481
Nonaffiliates 29,069 39,870
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Total partnership expenses 96,165 435,492
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Loss from partnership operations (87,021) (417,759)
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Net loss $ (87,021) $ (1,877,565)
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Net loss allocated to General Partners $ (957) $ (20,635)
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Net loss allocated to Limited Partners $ (86,064) $ (1,856,930)
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Net loss
Portfolio I (514 Interests) $ (134) $ (2,882)
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Portfolio II (135 Interests) $ (129) $ (2,781)
========= ============
The accompanying notes are an integral part of the combined financial
statements.
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VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
COMBINED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
VMS National
Hotel VMS National Hotel Portfolio I
Partners Limited Partners
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General General Subscription
Partners Partners Total Notes Net Total
---------- ---------- ------------ ------------ --------- ---------
Partners' capital (deficit)
at January 1, 1997 $(75,693) $ (482,196) $ 2,140,280 $ (1,159,887) $ 980,393 $ 498,197
Net loss for the period (87) (694) (68,662) --- (68,662) (69,356)
-------- ---------- ============ ============ ========= =========
Partners' capital (deficit)
at March 31, 1997 $(75,780) $ (482,890) $ 2,071,618 $ (1,159,887) $ 911,731 $ 428,841
======== ========== ============ ============ ========= =========
VMS National Hotel Portfolio II
Limited Partners
----------------------------------------
General Subscription Combined
Partners Total Notes Net Total Totals
--------- --------- ------------- ---------- --------- ----------
Partners' capital (deficit)
at January 1, 1997 $(126,198) $ 658,775 $ (177,270) $ 481,505 $ 355,307 $ 777,811
Net loss for the period (176) (17,402) --- (17,402) (17,578) (87,021)
--------- --------- ------------ ---------- --------- ----------
Partners' capital (deficit)
at March 31, 1997 $(126,374) $ 641,373 $ (177,270) $ 464,103 $ 337,729 $ 690,790
========= ========= ============ ========== ========= ==========
The accompanying notes are an integral part of the combined financial
statements.
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VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
COMBINED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
1997 1996
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OPERATING ACTIVITIES
Net loss $ (87,021) $ (1,877,565)
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
Changes in operating assets and liabilities:
Decrease in accounts receivable -- 124,071
Decrease in prepaid expenses -- 227,126
Decrease in inventories -- 13,402
Decrease in accounts payable and accrued expenses (90,275) (929,516)
Increase in accrued interest payable -- 5,046,081
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NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (177,296) 2,603,599
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INVESTING ACTIVITIES
Additions to property and improvements -- (596,501)
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CASH USED IN INVESTING ACTIVITIES -- (596,501)
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FINANCING ACTIVITIES
Partners' capital contributions -- 11,279
Decrease in escrow and other deposits -- 1,173
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CASH PROVIDED BY FINANCING ACTIVITIES -- 12,452
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Net (decrease) increase in cash and cash equivalents (177,296) 2,019,550
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Cash and cash equivalents at beginning of period 847,399 6,179,655
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Cash and cash equivalents at end of period $ 670,103 $ 8,199,205
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Interest Paid $ -- $ 500,000
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The accompanying notes are an integral part of the combined financial
statements.
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VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
1. BASIS OF ACCOUNTING
The accompanying unaudited combined financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information, with the instructions to Form 10-Q and
Article 10 of Regulation S-X. In the opinion of the General Partner,
all adjustments necessary for fair presentation of the results of
operations for the three months ended March 31, 1997 and 1996, have been
made to the financial information furnished herein. For further
information refer to the combined financial statements and footnotes
thereto included in the Partnerships' annual report on Form 10-K for the
year ended December 31, 1996.
On May 10, 1996, the Operating Partnership and affiliated
sub-partnerships filed for relief under Chapter 11 of the federal
bankruptcy laws in the United States Bankruptcy Court for the Northern
District of Illinois. This filing excludes Partnership I and
Partnership II. Pursuant to the Plan of Reorganization, the deeds to
the remaining hotels were transferred to the senior lender on September
26, 1996 in consideration for the cancellation of the senior
indebtedness (the "Transfer").
As a result of the Transfer, the Partnerships no longer have a source of
funds. A cash reserve is being maintained for payment of the
Partnerships' obligations and contingencies.
2. RELATED PARTY TRANSACTIONS
Under the terms of the various Partnership Agreements, the Managing
General Partner and its affiliates are to provide management, financing
and other services to Portfolio I, Portfolio II and the Operating
Partnership in return for certain fees as follows:
Fees paid and payable for the three months ended
March 31, 1997
Paid Payable
Managing General Partner
Salary (1) $50,000 $ ---
Other services and costs (2) 10,038 8,977
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$60,038 $8,977
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(1) The Partnership Agreements specify the dollar amount of
this fee. The various Partnerships are obligated to incur in the
aggregate, $50,000 per year of salary fees in the future.
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VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
2. RELATED PARTY TRANSACTIONS (CONTINUED)
(2) These fees represent reimbursement for partnership
accounting, printing, legal department, data processing and
travel and communication expenses incurred by affiliates for the
Managing General Partner for operation of the Partnerships.
3. LITIGATION
Certain affiliates of the Partnerships, including the Managing General
Partner and certain officers and directors of such affiliates are
parties to certain pending legal proceedings as described in Form 10-K
for the year ended December 31, 1996 filed as of March 31, 1997 and
certain other proceedings. The adverse outcome of any one or more legal
proceedings against any one of the affiliates which provides financial
support or services to the Partnerships could have a materially adverse
effect on the present and future operations of the Partnerships. There
can be no assurance as to the outcome of any of the legal proceedings.
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PART I
VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
On October 28, 1985, VMS National Hotel Portfolio I and II (the Partnerships)
commenced a private offering of $97,350,000 in Limited Partnership interests
pursuant to their respective Private Placement Memorandums. A total of 649
units were offered and sold at $150,000 per unit. Subscribers for the Units
had the option to contribute partially in cash upon subscription with the
remaining purchase price payable in annual installments over a five year period
or on a basis other than the foregoing option, which was acceptable to the
Managing General Partner in its sole discretion. The Limited Partner selecting
to pay in the remaining purchase price of their units over a five year period
executed and delivered to the Partnerships full recourse notes payable.
VMS National Hotel Partners (the Operating Partnership) originally intended to
purchase 28 hotels from Holiday Inns, Inc. (HII). Under the terms of the
offering, investors would receive a rebate of a portion of their capital
contribution if fewer than 28 hotels were acquired. Only 24 hotels were
actually purchased, resulting in a $15,000 per unit rebate to each Limited
Partner. The $15,000 per unit was payable over a five year period to each
Limited Partner who elected the five year payment option. The Limited Partners
who elected the all-cash option or who prepaid their notes received the $15,000
per unit rebate upon payment of their purchase price of $150,000 per unit.
LIQUIDITY AND CAPITAL RESOURCES
As a result of the Transfer in 1996, the Partnerships no longer have a source
of funds. A cash reserve is being maintained for payment of the Partnerships'
obligations and contingencies.
As shown on the Combined Statements of Cash Flows, cash and cash equivalents
decreased $177,296 from December 31, 1996 to March 31, 1997. The decrease is
primarily the result of payments for Partnership obligations.
RECENT DEVELOPMENTS - VMS REALTY PARTNERS AND AFFILIATES
There have been no material developments or changes from the Recent
Developments - VMS Realty Partners and Affiliates disclosed in Part I, Item 1
of the Partnerships' report on Form 10-K for the year ended December 31, 1996.
RESULTS OF OPERATIONS
For the quarter ended March 31, 1996, the Operating Partnership owned and
operated fifteen hotels located in eight states throughout the continental
United States. However, overall revenues and expenses of the Partnerships
decreased in 1997 due to the Transfer of the remaining hotels to the senior
lender on September 26, 1996. The Operating Partnership had previously owned
and operated 24 Holiday Inn Hotels in eleven states.
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PART I
VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Partnership revenues for the three months ended March 31, 1997 decreased from
the same period in 1996. The decrease is primarily due to the interest income
received in 1996 from the collection of the notes receivable and temporary
investments.
General Partners fees decreased from the first quarter of 1997 to 1996 due to
the decrease in hotel revenues from the Transfer of the hotels. These fees
were based on gross revenues from the hotels.
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PART II - OTHER INFORMATION
VMS NATIONAL HOTEL PORTFOLIO I
VMS NATIONAL HOTEL PORTFOLIO II
VMS NATIONAL HOTEL PARTNERS
1. LEGAL PROCEEDINGS
There have been no material developments or changes from Part I, Item 3 of the
Partnerships' report on Form 10-K for the year ended December 31, 1996.
ITEMS 2 THROUGH 4
Items 2 through 6 are omitted because of the absence of conditions under which
they are required.
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SIGNATURES
PURSUANT to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
VMS National Hotel Partners
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(Registrant)
By: VMS National Hotel Portfolio I
By: VMS Realty Investment, Ltd.,
Managing General Partner
By: JAS Realty Corporation
Date: May 9, 1997 By: /s/ Joel A. Stone
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Joel A. Stone, President
Date: May 9, 1997 By: /s/ Thomas A. Gatti
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Thomas A. Gatti,
Chief Financial Officer
By: VMS National Hotel Portfolio II
By: VMS Realty Investment, Ltd.,
Managing General Partner
By: JAS Realty Corporation
Date: May 9, 1997 By: /s/ Joel A. Stone
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Joel A. Stone, President
Date: May 9, 1997 By: /s/ Thomas A. Gatti
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Thomas A. Gatti,
Chief Financial Officer
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