1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the quarterly period ended June 30, 1997
or
( ) Transition Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the transition period from _____________ to _____________
Commission File Number 0-14956
VMS National Hotel Partners
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(Exact name of registrant as specified in its charter)
Illinois 36-3370590
------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
630 Dundee Road, Suite 220, Northbrook, Illinois 60062
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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
------
June 30, 1997 December 31, 1997
------------- -----------------
Cash and cash equivalents $ 602,946 $ 847,399
Interest receivable 29,664 29,664
------------ ------------
Total assets $ 632,610 $ 877,063
============ ============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
LIABILITIES
Other accounts payable and accrued expenses:
Affiliates $ 2,528 $ 1,919
Nonaffiliates -- 97,333
------------ ------------
Total liabilities 2,528 99,252
------------ ------------
Partners' capital (deficit)
General Partners (685,710) (684,087)
Limited Partners:
Portfolio I-514 Interests 863,830 980,393
Portfolio II-135 Interests 451,962 481,505
------------ ------------
Total partners' capital (deficit) 630,082 777,811
------------ ------------
Total liabilities and
partners' capital (deficit) $ 632,610 $ 877,063
============ ============
The accompanying notes are an integal 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 SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<Captions>
HOTEL OPERATIONS 1997 1996
------------ ------------
Revenues:
Rooms $ -- $ 30,245,602
Food and beverage -- 7,651,035
Telephone -- 1,519,776
Other -- 1,658,105
------------ ------------
Total revenues -- 41,074,518
Direct costs and expenses:
Rooms -- 7,665,737
Food and beverage -- 6,306,017
Telephone -- 1,483,358
Other -- 1,056,248
------------ ------------
Total direct costs and expenses -- 16,511,360
Unallocated expenses:
Administrative and general -- 3,846,164
Management fees -- 869,340
Marketing -- 3,836,696
Energy -- 1,893,078
Property operations and maintenance -- 1,916,026
Property taxes and insurance -- 1,669,072
Rent -- 550,292
Mortgage interest (contractual interest
for 1996-$11,092,162) -- 7,983,919
------------ ------------
Total unallocated expenses -- 22,564,587
------------ ------------
Income from hotel operations -- 1,998,571
------------ ------------
PARTNERSHIP OPERATIONS
Revenues:
Interest on subscription notes -- 43,466
Interest on temporary investments 17,435 27,610
------------ ------------
Total partnership revenues 17,435 71,076
------------ ------------
Expenses:
Managing General Partners' fees 50,000 743,787
Professional, consulting and other fees:
Affiliates 32,079 134,185
Nonaffiliates 84,085 62,954
------------ ------------
Total partnership expenses 165,164 940,926
------------ ------------
Loss from partnership operations (147,729) (869,850)
------------ ------------
REORGANIZATION ITEMS
Professional, consulting and other fees -- 397,028
------------ ------------
Total reorganization expenses -- 397,028
------------ ------------
Net (loss) income $ (147,729) $ 731,693
============ ============
Net (loss) income allocated to
General Partners $ (1,623) $ 8,042
============ ============
Net (loss) income allocated to
Limited Partners $ (146,106) $ 723,651
============ ============
Net (loss) income per Limited Partner
interest Portfolio I (514 Interests) $ (227) $ 1,123
============ ============
Portfolio II (135 Interests) $ (219) $ 1,084
============ ============
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 JUNE 30, 1997 AND 1996
(UNAUDITED)
<Captions>
HOTEL OPERATIONS 1997 1996
------------ ------------
Revenues:
Rooms $ -- $ 16,087,479
Food and beverage -- 3,885,783
Telephone -- 739,658
Other -- 885,347
------------ ------------
Total revenues -- 21,598,267
Direct costs and expenses:
Rooms $ -- $ 4,000,375
Food and beverage -- 3,221,680
Telephone -- 762,919
Other -- 546,924
------------ ------------
Total direct costs and expenses -- 8,531,898
Unallocated expenses:
Administrative and general -- 1,667,682
Management fees -- 436,079
Marketing -- 1,985,390
Energy -- 986,725
Property operations and maintenance -- 974,024
Property taxes and insurance -- 839,970
Rent -- 280,284
Mortgage interest (contractual interest
for 1996-$5,546,081) -- 2,437,838
------------ ------------
Total unallocated expenses -- 9,607,992
------------ ------------
Income from hotel operations -- 3,458,377
------------ ------------
PARTNERSHIP OPERATIONS
Revenues:
Interest on subscription notes -- 41,161
Interest on temporary investments 8,291 12,182
------------ ------------
Total partnership revenues 8,291 53,343
------------ ------------
Expenses:
Managing General Partners' fee -- 418,646
Professional, consulting and other fees:
Affiliates 13,983 63,704
Nonaffiliates 55,016 23,084
------------ ------------
Total partnership expenses 68,999 505,434
------------ ------------
Loss from partnership operations (60,708) (452,091)
------------ ------------
REORGANIZATION ITEMS
Professional, consulting and other fees -- 397,028
------------ ------------
Total reorganization expenses -- 397,028
------------ ------------
Net (loss) income $ (60,708) $ 2,609,258
============ ============
Net (loss) income allocated to
General Partners $ (666) $ 28,677
============ ============
Net (loss) income allocated to
Limited Partners $ (60,042) $ 2,580,581
============ ============
Net (loss) income per Limited Partner
interest
Portfolio I (514 Interests) $ (93) $ 4,005
============ ============
Portfolio II (135 Interests) $ (90) $ 3,865
============ ============
The accompanying notes are an intergal 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 SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
VMS National
Hotel
Partners VMS National Hotel Portfolio I
----------- --------------------------------------------------------------------------------------------
Limited Partners
----------------------------------------------------
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 (148) (1,177) (116,563) --- (116,563) (117,740)
Partners' capital (deficit)
at June 30, 1997 $ (75,841) $ (483,373) $ 2,023,717 $ (1,159,887) $ 863,830 $ 380,457
=========== =========== ============ ============= ========== ==========
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 (298) (29,543) -- (29,543) (29,841) (147,729)
Partners' capital (deficit)
at June 30, 1997 $ (126,496) $ 629,232 $ (177,270) $ 451,962 $ 325,466 $ 630,082
========== =========== =========== ========== ========== ===========
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 SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
1997 1996
-------------- ------------
OPERATING ACTIVITIES
Net (loss) income $ (147,729) $ 731,693
Adjustments to reconcile net (loss) income
to net cash (used in) provided by
operating activities
Changes in operating assets and liabilities:
Decrease in accounts receivable --- 46,436
Decrease in interest receivable --- 775
Decrease in prepaid expenses --- 57,314
Decrease in inventories --- 29,557
(Decrease) Increase in accounts payable
and accrued expenses (96,724) 1,788,032
Increase in accrued interest payable --- 4,483,919
-------------- ------------
NET CASH (USED IN) PROVIDED BY OPERATING
ACTIVITIES (244,453) 7,137,726
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INVESTING ACTIVITIES
Additions to property and improvements --- (690,822)
-------------- ------------
CASH USED IN INVESTING ACTIVITIES --- (690,822)
-------------- ------------
FINANCING ACTIVITIES
Partners' capital contributions --- 35,093
Increase in escrow and other deposits --- (5,137)
-------------- ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES --- 29,956
-------------- ------------
Net (decrease) increase in cash and cash
equivalents (244,453) 6,476,860
-------------- ------------
Cash and cash equivalents at beginning
of period 847,399 6,179,655
-------------- ------------
Cash and cash equivalents at end of period $ 602,946 $ 12,656,515
============== ============
Interest Paid $ --- $ 3,500,000
============== ============
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
JUNE 30, 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 six months ended June 30, 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 six months ended
June 30, 1997
Paid Payable
Managing General Partner
Salary (1) $ 50,000 $ ---
Other services and costs (2) 30,470 2,528
--------- ---------
$ 80,470 $ 2,528
========= =========
(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
JUNE 30, 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.
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").
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.
In the short term, the Partnerships will continue to maintain a cash reserve
for the payment of the remaining Partnerships' obligations and contingent
liabilities. In the long term, the Partnerships will wind-up their affairs and
will distribute any remaining Partnerships' funds to their Limited Partners
after paying all Partnerships' expenses and the Partnerships will be dissolved
at that time.
As shown on the Combined Statements of Cash Flows, cash and cash equivalents
decreased $244,453 from December 31, 1996 to June 30, 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.
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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
For the six months ended June 30, 1996, the Operating Partnership owned and
operated fifteen hotels located in eight states throughout the continental
United States. However, the revenues and expenses from the Partnerships' hotel
operations in 1997 are zero due to the Transfer of the remaining hotels to the
senior lender on September 26, 1996.
Partnership revenues for the six months ended June 30, 1997 decreased by
$53,641 from the same period in 1996. The decrease is due to the reduction in
interest income and interest on the collection of notes receivable in the
amounts of $43,466 and $10,175 respectively.
Partnership expenses for the six months ended June 30, 1997 decreased by
$775,762 from the same period in 1996. The decrease is primarily due to a
reduction of General Partners fees which are based on the gross revenues from
the hotels in the amount of $693,787. The decrease is also due to the
reduction in professional, consulting and other fees in the amount of $81,975
which is the result of the transfer of 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
(Registrant)
By: VMS National Hotel Portfolio I
By: VMS Realty Investment, Ltd.,
Managing General Partner
By: JAS Realty Corporation
Date: August 6, 1997 By: /s/ Joel A. Stone
------------------------
Joel A. Stone, President
Date: August 6, 1997 By: /s/ Thomas A. Gatti
------------------------
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: August 6, 1997 By: /s/ Joel A. Stone
------------------------
Joel A. Stone, President
Date: August 6, 1997 By: /s/ Thomas A. Gatti
------------------------
Thomas A. Gatti,
Chief Financial Officer
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