UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
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___
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes ___ No X_
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VMS NATIONAL PROPERTIES JOINT VENTURE
COMBINED BALANCE SHEETS
(in thousands)
March 31, December 31,
2005 2004
(Unaudited) (Note)
Assets:
Cash and cash equivalents $ 1,749 $ 2,064
Receivables and deposits 2,284 2,009
Restricted escrows 670 1,115
Other assets 1,251 737
Investment properties:
Land 13,404 13,404
Buildings and related personal property 156,501 155,459
169,905 168,863
Less accumulated depreciation (121,339) (119,509)
48,566 49,354
$ 54,520 $ 55,279
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 1,773 $ 1,328
Tenant security deposit liabilities 830 855
Accrued property taxes 1,015 695
Other liabilities 683 827
Accrued interest 584 560
Due to affiliates (Note D) 7,831 7,335
Mortgage notes payable, including $21,906 and $22,123
due to an affiliate at March 31, 2005 and
December 31, 2004, respectively (Note D) 121,258 121,992
Mortgage participation liability (Note C) 19,909 18,554
Notes payable (Note B) 42,060 42,060
Deferred gain on extinguishment of debt (Note B) 42,225 42,225
Partners' Deficit (183,648) (181,152)
$ 54,520 $ 55,279
Note: The combined balance sheet at December 31, 2004 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
VMS NATIONAL PROPERTIES JOINT VENTURE
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per partnership interest data)
Three Months Ended
March 31,
2005 2004
Revenues:
Rental income $ 7,259 $ 6,885
Other income 563 589
Total revenues 7,822 7,474
Expenses:
Operating 3,237 2,632
Property management fees to an affiliate 308 298
General and administrative 155 145
Depreciation 1,830 1,784
Interest 4,242 4,247
Property taxes 546 537
Total expenses 10,318 9,643
Net loss $(2,496) $(2,169)
Net loss allocated to general partners (2%) $ (50) $ (43)
Net loss allocated to limited partners (98%) (2,446) (2,126)
$(2,496) $(2,169)
Net loss per limited partnership interest:
Portfolio I (644 interests issued and outstanding) $(2,685) $(2,334)
Portfolio II (267 interests issued and outstanding) $(2,685) $(2,333)
See Accompanying Notes to Combined Financial Statements
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, 2004 $(3,862) $(123,193) $ (502) $(123,695) $(127,557)
Net loss for the
three months ended
March 31, 2005 (35) (1,729) -- (1,729) (1,764)
Partners' deficit at
March 31, 2005 $(3,897) $(124,922) $ (502) $(125,424) $(129,321)
VMS National Residential Portfolio II
Limited Partners
Limited
General Accumulated Subscription Partners'
Partners Deficit Notes Total Total
Partners' deficit at
December 31, 2004 $(1,616) $ (51,651) $ (328) $ (51,979) $ (53,595)
Net loss for the
three months ended
March 31, 2005 (15) (717) -- (717) (732)
Partners' deficit at
March 31, 2005 $(1,631) $ (52,368) $ (328) $ (52,696) $ (54,327)
Combined total $(5,528) $(177,290) $ (830) $(178,120) $(183,648)
See Accompanying Notes to Combined Financial Statements
VMS NATIONAL PROPERTIES JOINT VENTURE
COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2005 2004
Cash flows from operating activities:
Net loss $(2,496) $(2,169)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation 1,830 1,784
Amortization of mortgage discounts 1,355 1,359
Change in accounts:
Receivables and deposits (275) (292)
Other assets (514) (690)
Accounts payable 522 404
Tenant security deposit liabilities (25) (8)
Accrued property taxes 320 270
Accrued interest 449 515
Other liabilities (144) (159)
Due to affiliate 257 138
Net cash provided by operating activities 1,279 1,152
Cash flows from investing activities:
Property improvements and replacements (1,119) (614)
Net withdrawals from (deposits to) restricted escrows 445 (39)
Net cash used in investing activities (674) (653)
Cash flows from financing activities:
Payments on mortgage notes payable (1,159) (1,086)
Advances from an affiliate 239 763
Net cash used in financing activities (920) (323)
Net (decrease) increase in cash and cash equivalents (315) 176
Cash and cash equivalents at beginning of period 2,064 1,761
Cash and cash equivalents at end of period $ 1,749 $ 1,937
Supplemental disclosure of cash flow information:
Cash paid for interest, including approximately $156 and
$185 paid to an affiliate $ 2,256 $ 2,292
Supplemental disclosure of non-cash activity:
Accrued interest added to mortgage notes payable $ 425 $ 479
At March 31, 2005 and December 31, 2004 accounts payable and property
improvements and replacements were adjusted by approximately $780,000 and
$857,000, respectively.
Included in property improvements and replacements for the three months ended
March 31, 2004 are approximately $47,000 of improvements which were included in
accounts payable at December 31, 2003.
See Accompanying Notes to Combined Financial Statements
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, 2005 are not necessarily indicative of the
results which may be expected for the year ending December 31, 2005. 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, 2004. The Managing General Partner is a wholly owned subsidiary of Apartment
Investment and Management Company ("AIMCO"), a publicly traded real estate
investment trust.
Note B - Deferred Gain and Notes Payable
Deferred Gain on Extinguishment of Debt:
When the senior and junior loans refinanced in 1997, the senior 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 debt. If the Venture defaults on the
mortgage notes payable or is unable to pay the outstanding agreed valuation
amounts upon maturity, then the note face amounts become due. Accordingly, the
Venture deferred recognition of a gain of $42,225,000, which is the difference
between the note face amounts and the agreed valuation amounts.
Assignment Note:
The Venture executed a purchase money subordinated note (the "Assignment Note")
payable to the VMS/Stout Venture, an affiliate of the former general partner, 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.
In November 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.
At March 31, 2005 and December 31, 2004, the $38,810,000 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
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code," 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%. Interest expense was being recognized through the amortization of the
discount which became fully amortized in January 2000.
Long-Term Loan Arrangement Fee Note:
The Venture executed an 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 note in the amount of $3,250,000 does not bear interest and is payable only
after debt of a higher priority, including senior and junior mortgage loans,
have been repaid.
Note C - Participating Mortgage Note
AIMCO Properties LP, which owns the Managing General Partner and which is a
controlled affiliate of AIMCO, purchased (i) the junior debt on November 19,
1999; (ii) a significant interest in the residual value of the properties on
November 16, 1999, and (iii) a significant interest in the Bankruptcy Claims (as
defined below) effective September 2000. These transactions occurred between
AIMCO Properties, L.P. 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 Venture's investment properties or
refinancing of the mortgages encumbering such investment properties after
payment of selling or refinancing costs and repayment of the senior and junior
debt, plus accrued interest on each. The agreement states that the Venture will
retain an amount equal to $13,500,000 plus accrued interest at 10% compounded
monthly (the "Partnership Advance Account") from the proceeds. Interest began
accruing on the Partnership Advance Account in 1993 when the bankruptcy plan was
finalized. Any proceeds remaining after the Partnership Advance Account is fully
funded are split equally (the "50/50 Split") between the Venture and AIMCO
Properties, L.P. The Venture must repay the Assignment Note, the Long-term Loan
Arrangement Fee Note and other pre-petition claims (collectively the "Bankruptcy
Claims") which collectively total approximately $42,139,000 from the Partnership
Advance Account. Any amounts remaining in the Partnership Advance Account after
payment of the Bankruptcy Claims are split 75% to the Venture and 25% to AIMCO
Properties, L.P.
The Venture has recorded the estimated fair value of the participation feature
as a mortgage participation liability of approximately $32,009,000 and
$36,518,000 for the three months ended March 31, 2005 and 2004, respectively.
The Managing General Partner reevaluated the fair value of the participation
feature during the year ended December 31, 2004 and concluded that the fair
value of the participation feature should be reduced by approximately
$4,509,000. The fair value of the participation feature was calculated based
upon information currently available to the Managing General Partner and depends
largely upon the fair value of the income of the collateral properties. These
fair values were determined using the net operating income of the properties
capitalized at a rate deemed reasonable for the type of property adjusted for
market conditions, the physical condition of the property and other factors. The
reduction in the fair value of the participation feature is attributable to an
increase in the estimated value of the junior loans and advances from the
Managing General Partner that will be due at maturity partially offset by an
increase in the estimated fair value of the collateral properties. During the
three months ended March 31, 2005 and 2004, the Venture amortized approximately
$1,355,000 and $1,359,000, respectively, of the mortgage participation debt
discount which is included in interest expense. The related mortgage
participation debt discount at March 31, 2005 and December 31, 2004 was
approximately $12,100,000 and $13,455,000, respectively.
Note D - Transactions with Affiliated Parties
The Venture has no employees and depends on the Managing General Partner and its
affiliates for the management and administration of all Venture activities. The
Revised and Amended Asset Management Agreement provides 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, adjusted
annually by the consumer price index 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 $93,000 and $81,000 were charged by
affiliates of the Managing General Partner for the three months ended March 31,
2005 and 2004, respectively. These fees are included in general and
administrative expense. At March 31, 2005, approximately $93,000 of such fees
were owed and are included in due to affiliates. No amounts were owed at
December 31, 2004.
Affiliates of the Managing General Partner receive a percentage of the gross
receipts from all of the Venture's properties as compensation for providing
property management services. The Venture paid to such affiliates approximately
$308,000 and $298,000 for the three months ended March 31, 2005 and 2004,
respectively, which are included in property management fee expense.
Affiliates of the Managing General Partner charged the Venture reimbursement of
accountable administrative expenses amounting to approximately $25,000 for each
of the three month periods ended March 31, 2005 and 2004. These expenses are
included in general and administrative expense. At March 31, 2005, approximately
$9,000 of reimbursements were accrued by the Venture and are included in due to
affiliates on the accompanying combined balance sheet. No amounts were owed at
December 31, 2004.
During the three months ended March 31, 2005 and 2004, the Venture paid fees
related to construction management services provided by an affiliate of the
Managing General Partner of approximately $130,000 and $27,000, respectively.
The construction management service fees are calculated based on a percentage of
current year additions to investment properties and are included in investment
properties.
An affiliate of the Managing General Partner received bookkeeping reimbursements
in the amount of approximately $31,000 for each of the three month periods ended
March 31, 2005 and 2004. These expenses are included in operating expense.
At March 31, 2005 and December 31, 2004, the Venture owed loans of approximately
$6,587,000 and $6,348,000 to an affiliate of the Managing General Partner plus
accrued interest thereon of approximately $1,142000 and $987,000, respectively,
which are included in due to affiliates on the combined balance sheets. These
loans were made in accordance with the Joint Venture Agreement and accrue
interest at the prime rate plus 3% (8.75% at March 31, 2005). The Venture
recognized interest expense of approximately $155,000 and $80,000 during the
three months ended March 31, 2005 and 2004, respectively. Subsequent to March
31, 2005, an affiliate of the Managing General Partner loaned Vista Village
Apartments, Crosswood Park, North Park Apartments and The Towers of Westchester
Park approximately $70,000, $43,000, $186,000 and $101,000, respectively, to
cover outstanding capital improvement payables.
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, 2005 and December 31, 2004, 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 bankruptcy plan. There were no property
dispositions for which proceeds were received during either of the three month
periods ended March 31, 2005 or 2004.
The junior debt of approximately $21,906,000 and $22,123,000 at March 31, 2005
and December 31, 2004, respectively, is held by an affiliate of the Managing
General Partner. The monthly principal and interest payments are based on
monthly excess cash flow for each property, as defined in the mortgage
agreement. During the three months ended March 31, 2005 and 2004, the Venture
recognized interest expense of approximately $586,000 and $621,000,
respectively.
The Venture insures its properties up to certain limits through coverage
provided by AIMCO which is generally self-insured for a portion of losses and
liabilities related to workers compensation, property casualty and vehicle
liability. The Venture insures its properties above the AIMCO limits through
insurance policies obtained by AIMCO from insurers unaffiliated with the
Managing General Partner. During the three months ended March 31, 2005, the
Venture was charged by AIMCO and its affiliates approximately $330,000 for
hazard insurance coverage and fees associated with policy claims administration.
Additional charges will be incurred by the Venture during 2005 as other
insurance policies renew later in the year. The Venture was charged by AIMCO and
its affiliates approximately $423,000 during the year ended December 31, 2004.
Note E - Casualty Event
On February 28, 2005, a fire was caused by a contractor working at Casa de
Monterey that severely damaged six units of an eight unit apartment building.
The estimated repairs will total approximately $500,000, all of which will be
paid for by insurance proceeds. The Managing General Partner does not believe
the Venture will incur a loss as a result of the casualty.
Note F - Contingencies
AIMCO Properties L.P. and NHP Management Company, both affiliates of the
Managing General Partner, are defendants in a lawsuit alleging that they
willfully violated the Fair Labor Standards Act ("FLSA") by failing to pay
maintenance workers overtime for all hours worked in excess of forty per week.
The complaint attempts to bring a collective action under the FLSA and seeks to
certify state subclasses in California, Maryland, and the District of Columbia.
Specifically, the plaintiffs contend that AIMCO Properties L.P. and NHP
Management Company failed to compensate maintenance workers for time that they
were required to be "on-call." Additionally, the complaint alleges AIMCO
Properties L.P. and NHP Management Company failed to comply with the FLSA in
compensating maintenance workers for time that they worked in responding to a
call while "on-call." The defendants have filed an answer to the amended
complaint denying the substantive allegations. Oral argument relating to the
certification of the collective action took place on May 12, 2005 and the
parties await a ruling from the Court. Although the outcome of any litigation is
uncertain, AIMCO Properties, L.P. does not believe that the ultimate outcome
will have a material adverse effect on its financial condition or results of
operations. Similarly, the Managing General Partner does not believe that the
ultimate outcome will have a material adverse effect on the Venture's combined
financial condition or results of operations.
The Venture is unaware of any other pending or outstanding litigation matters
involving it or its investment properties that are not of a routine nature
arising in the ordinary course of business.
Environmental
Various Federal, state and local laws subject property owners or operators to
liability for management, and the costs of removal or remediation, of certain
hazardous substances present on a property. Such laws often impose liability
without regard to whether the owner or operator knew of, or was responsible for,
the release or presence of the hazardous substances. The presence of, or the
failure to manage or remedy properly, hazardous substances may adversely affect
occupancy at affected apartment communities and the ability to sell or finance
affected properties. In addition to the costs associated with investigation and
remediation actions brought by government agencies, the presence of hazardous
substances on a property could result in claims by private plaintiffs for
personal injury, disease, disability or other infirmities. Various laws also
impose liability for the cost of removal, remediation or disposal of hazardous
substances through a licensed disposal or treatment facility. Anyone who
arranges for the disposal or treatment of hazardous substances is potentially
liable under such laws. These laws often impose liability whether or not the
person arranging for the disposal ever owned or operated the disposal facility.
In connection with the ownership and operation of its properties, the Venture
could potentially be liable for environmental liabilities or costs associated
with its properties.
Mold
The Venture is aware of lawsuits against owners and managers of multifamily
properties asserting claims of personal injury and property damage caused by the
presence of mold, some of which have resulted in substantial monetary judgments
or settlements. The Venture has only limited insurance coverage for property
damage loss claims arising from the presence of mold and for personal injury
claims related to mold exposure. Affiliates of the Managing General Partner have
implemented a national policy and procedures to prevent or eliminate mold from
its properties and the Managing General Partner believes that these measures
will eliminate, or at least minimize, the effects that mold could have on
residents. To date, the Venture has not incurred any material costs or
liabilities relating to claims of mold exposure or to abate mold conditions.
Because the law regarding mold is unsettled and subject to change the Managing
General Partner can make no assurance that liabilities resulting from the
presence of or exposure to mold will not have a material adverse effect on the
Venture's combined financial condition or results of operations.
SEC Investigation
The Central Regional Office of the United States Securities and Exchange
Commission (the "SEC") is conducting a formal investigation relating to certain
matters. Although the staff of the SEC is not limited in the areas that it may
investigate, AIMCO believes the areas of investigation include AIMCO's
miscalculated monthly net rental income figures in third quarter 2003,
forecasted guidance, accounts payable, rent concessions, vendor rebates,
capitalization of payroll and certain other costs, and tax credit transactions.
At the end of the first quarter of 2005, the SEC added certain tender offers for
limited partnership interests as an area of investigation. AIMCO is cooperating
fully. AIMCO is not able to predict when the investigation will be resolved.
AIMCO does not believe that the ultimate outcome will have a material adverse
effect on its consolidated financial condition or results of operations.
Similarly, the Managing General Partner does not believe that the ultimate
outcome will have a material adverse effect on the Venture's combined financial
condition or results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government regulations. Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including, without limitation: national and local
economic conditions; the terms of governmental regulations that affect the
Venture and interpretations of those regulations; the competitive environment in
which the Venture operates; financing risks, including the risk that cash flows
from operations may be insufficient to meet required payments of principal and
interest; real estate risks, including variations of real estate values and the
general economic climate in local markets and competition for tenants in such
markets; litigation, including costs associated with prosecuting and defending
claims and any adverse outcomes, and possible environmental liabilities. Readers
should carefully review the Venture's financial statements and the notes
thereto, as well as the risk factors described in the documents the Venture
files from time to time with the Securities and Exchange Commission.
Average occupancy rates for the three months ended March 31, 2005 and 2004, for
all of the Venture's properties are as follows:
Average Occupancy
Property 2005 2004
North Park Apartments (1)
Evansville, IN 90% 96%
Chapelle Le Grande (1)
Merrillville, IN 94% 98%
Terrace Gardens (2)
Omaha, NE 88% 82%
Forest Ridge Apartments
Flagstaff, AZ 93% 91%
Scotchollow (2)
San Mateo, CA 87% 80%
Pathfinder Village (2)
Fremont, CA 92% 86%
Buena Vista Apartments (3)
Pasadena, CA 97% 92%
Mountain View Apartments
San Dimas, CA 95% 93%
Crosswood Park (1)
Citrus Heights, CA 88% 93%
Casa de Monterey
Norwalk, CA 95% 93%
The Bluffs (2)
Milwaukie, OR 95% 90%
Watergate Apartments (3)
Little Rock, AR 95% 85%
Shadowood Apartments (1)
Monroe, LA 84% 93%
Vista Village Apartments (4)
El Paso, TX 91% 96%
The Towers of Westchester Park
College Park, MD 98% 99%
(1) The decrease in occupancy at North Park Apartments, Chappelle Le Grande,
Crosswood Park and Shadowood Apartments is due to a weak economy and
increased competition in the properties' market area.
(2) The increase in occupancy at Terrace Gardens, Scotchollow, Pathfinder
Village and The Bluffs is due to property management focusing on
increasing occupancy through tenant retention and rental concessions.
(3) The increase in occupancy at Buena Vista Apartments and Watergate
Apartments is primarily due to property improvements and replacements that
made the properties more competitive in their respective market areas.
(4) The decrease in occupancy at Vista Village Apartments is due to increased
military deployments in the property's market area.
The Venture's financial results depend upon a number of factors including the
ability to attract and maintain tenants at the investment properties, interest
rates on mortgage loans, costs incurred to operate the investment properties,
general economic conditions and weather. As part of the ongoing business plan of
the Venture, the Managing General Partner monitors the rental market environment
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, the Managing General Partner may use rental concessions and rental rate
reductions to offset softening market conditions, accordingly, there is no
guarantee that the Managing General Partner will be able to sustain such a plan.
Further, a number of factors which are outside the control of the Venture such
as the local economic climate and weather can adversely or positively affect the
Venture's financial results.
Results of Operations
The Venture recorded a net loss for the three months ended March 31, 2005 of
approximately $2,496,000 compared to a net loss of approximately $ 2,169,000 for
the corresponding period in 2004. The increase in net loss for the three month
period is due to an increase in total expenses partially offset by an increase
in total revenues.
The increase in total revenues is due to an increase in rental income partially
offset by a decrease in other income. The increase in rental income is the
result of the increase in occupancy at nine of the Venture's properties. These
increases more than offset the occupancy decreases at six of the Venture's
properties and decreases in the average rental rate at five of the Venture's
properties. Other income decreased primarily due to decreases in lease
cancellation fees and cleaning and damage fees partially offset by an increase
in late charges and utility reimbursements charged by the properties.
Total expenses increased primarily due to increases in operating and
depreciation expenses. General and administrative, interest, property tax and
property management fee expenses remained relatively constant for the comparable
periods. Operating expenses increased primarily due to increases in property and
administrative expenses. Property expenses increased due to increases in
salaries and related employee expenses at ten of the Venture's properties and
utilities at eight of the Venture's properties. Administrative expenses
increased due to an increase in legal expenses at all of the Venture's
properties relating to the New Mezzanine Loan discussed below, training and
travel at five of the Venture's properties and contract services at four of the
Venture's properties. Depreciation expense increased due to property
improvements and replacements placed into service during the past twelve months
which are now being depreciated.
Included in general and administrative expenses for the three months ended March
31, 2005 and 2004 are reimbursements to the Managing General Partner allowed
under the Partnership Agreement associated with its management of the Venture.
Costs associated with quarterly and annual communications with investors and
regulatory agencies and the annual audit required by the Partnership Agreement
are also included in general and administrative expenses.
Liquidity and Capital Resources
At March 31, 2005, the Venture had cash and cash equivalents of approximately
$1,749,000 as compared to approximately $1,937,000 at March 31, 2004. Cash and
cash equivalents decreased approximately $315,000 from December 31, 2004. The
decrease in cash and cash equivalents is a result of approximately $920,000 and
$674,000 of cash used in financing and investing activities, respectively, which
is partially offset by approximately $1,279,000 of cash provided by operating
activities. Cash used in financing activities consisted of principal payments on
the mortgages encumbering the Venture's investment properties partially offset
by advances received from an affiliate. Cash used in investing activities
consisted of property improvements and replacements partially offset by net
withdrawals from restricted escrow accounts maintained by the mortgage lender.
The Venture invests its working capital reserves in interest bearing 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. The Managing General Partner
monitors developments in the area of legal and regulatory compliance. For
example, the Sarbanes-Oxley Act of 2002 mandates or suggests additional
compliance measures with regard to governance, disclosure, audit and other
areas. In light of these changes, the Venture expects that it will incur higher
expenses related to compliance. Capital improvements planned for each of the
Venture's properties are detailed below.
The Venture is generally restricted to annual capital improvements of $300 per
unit or approximately $888,000 for all of its properties. Such amount is equal
to the required replacement reserve funding of the senior debt. As the Venture
identifies properties which need additional capital improvements above $300 per
unit, approval of the holders of the junior and senior debt is required due to
the impact such expenditures have on the ability of the Venture to make required
principal and interest payments out of the properties monthly cashflow on the
junior debt. As such the Venture has identified approximately $6,440,000 of
capital improvements that need to be made to the properties as a result of life
safety issues, compliance with ADA requirements and general updating of the
properties. Such improvements are expected to be completed during 2005 and are
included in the additional capital improvements expected to be completed for
each property identified below. On November 2, 2004, the Venture, the holder of
the senior debt and AIMCO Properties, L.P., which is also the holder of the
junior debt, agreed that AIMCO Properties, L.P. would loan up to approximately
$6,440,000 to the Venture (the "New Mezzanine Loan") to fund the above mentioned
capital improvements that need to be made to the Venture's properties. The New
Mezzanine Loan bears interest at a rate of prime plus 3% with unpaid interest
being compounded monthly. The Venture, the holder of the senior debt and AIMCO
Properties, L.P. also agreed that cash flow that would otherwise be used to
repay the junior debt will instead be used to repay the New Mezzanine Loan,
until such time as the New Mezzanine Loan and all accrued interest thereon is
paid in full. The Venture's Managing General Partner believes that the payment
of such amounts to reduce the New Mezzanine Loan instead of the junior debt will
reduce the amount of the junior debt amortized prior to its maturity (therefore
increasing the amount due) by an amount at least equal to the principal and
interest on the New Mezzanine Loan, the effect of which will be to reduce the
ultimate payment received by holders of outstanding Bankruptcy Claims (see Item
1. Financial Statements, Note C - Participating Mortgage Note) by a similar
amount.
North Park Apartments: The Venture completed approximately $100,000 in capital
expenditures at North Park Apartments during the three months ended March 31,
2005 consisting primarily of floor covering and balcony replacements, major
landscaping and water and sewer upgrades. These improvements were funded from
operating cash flow and replacement reserves. The Venture regularly evaluates
the capital improvement needs of the property and anticipates spending the $300
per unit allowed under the senior debt replacement reserve funding on capital
improvements during 2005 in addition to the amounts identified in the below
schedule.
Chapelle Le Grande: The Venture completed approximately $7,000 in capital
expenditures at Chapelle Le Grande during the three months ended March 31, 2005,
consisting primarily of appliance and floor covering replacements. These
improvements were funded from operating cash flow and replacement reserves. The
Venture regularly evaluates the capital improvement needs of the property and
anticipates spending the $300 per unit allowed under the senior debt replacement
reserve funding on capital improvements during 2005 in addition to the amounts
identified in the below schedule.
Terrace Gardens: The Venture completed approximately $40,000 in capital
expenditures at Terrace Gardens during the three months ended March 31, 2005,
consisting primarily of HVAC, exterior doors and floor covering replacements.
These improvements were funded from operating cash flow and replacement
reserves. The Venture regularly evaluates the capital improvement needs of the
property and anticipates spending the $300 per unit allowed under the senior
debt replacement reserve funding on capital improvements during 2005 in addition
to the amounts identified in the below schedule.
Forest Ridge Apartments: The Venture completed approximately $1,000 in capital
expenditures at Forest Ridge Apartments during the three months ended March 31,
2005, consisting primarily of floor covering replacements. These improvements
were funded from operating cash flow and replacement reserves. The Venture
regularly evaluates the capital improvement needs of the property and
anticipates spending the $300 per unit allowed under the senior debt replacement
reserve funding on capital improvements during 2005 in addition to the amounts
identified in the below schedule.
Scotchollow: The Venture completed approximately $67,000 in capital expenditures
at Scotchollow during the three months ended March 31, 2005, consisting
primarily of structural improvements, floor covering, gutter, and appliance
replacements, exterior light fixtures, and water and sewer upgrades. These
improvements were funded from operations and replacement reserves. The Venture
regularly evaluates the capital improvement needs of the property and
anticipates spending the $300 per unit allowed under the senior debt replacement
reserve funding on capital improvements during 2005 in addition to the amounts
identified in the below schedule.
Pathfinder Village: The Venture completed approximately $120,000 in capital
expenditures at Pathfinder Village during the three months ended March 31, 2005,
consisting primarily of water heater upgrades, appliance, floor covering and
gutter replacements, water and sewer upgrades, parking lot resurfacing and
exterior light fixtures. These improvements were funded from operating cash flow
and replacement reserves. The Venture regularly evaluates the capital
improvement needs of the property and anticipates spending the $300 per unit
allowed under the senior debt replacement reserve funding on capital
improvements during 2005 in addition to the amounts identified in the below
schedule.
Buena Vista Apartments: The Venture completed approximately $48,000 in capital
expenditures at Buena Vista Apartments during the three months ended March 31,
2005, consisting primarily of floor covering and roof replacements and
structural improvements. These improvements were funded from operating cash flow
and replacement reserves. The Venture regularly evaluates the capital
improvement needs of the property and anticipates spending the $300 per unit
allowed under the senior debt replacement reserve funding on capital
improvements during 2005 in addition to the amounts identified in the below
schedule.
Mountain View Apartments: The Venture completed approximately $116,000 in
capital expenditures at Mountain View Apartments during the three months ended
March 31, 2005, consisting primarily of floor covering, major landscaping, and
structural improvements. These improvements were funded from operating cash flow
and replacement reserves. The Venture regularly evaluates the capital
improvement needs of the property and anticipates spending the $300 per unit
allowed under the senior debt replacement reserve funding on capital
improvements during 2005 in addition to the amounts identified in the below
schedule.
Crosswood Park: The Venture completed approximately $74,000 in capital
expenditures at Crosswood Park during the three months ended March 31, 2005,
consisting primarily of major landscaping, structural improvements and floor
covering replacements. These improvements were funded from operating cash flow
and replacement reserves. The Venture regularly evaluates the capital
improvement needs of the property and anticipates spending the $300 per unit
allowed under the senior debt replacement reserve funding on capital
improvements during 2005 in addition to the amounts identified in the below
schedule.
Casa de Monterey: The Venture completed approximately $38,000 in capital
expenditures at Casa de Monterey during the three months ended March 31, 2005,
consisting primarily of utility and electrical upgrades and fence replacements.
These improvements were funded from operating cash flow and replacement
reserves. The Venture regularly evaluates the capital improvement needs of the
property and anticipates spending the $300 per unit allowed under the senior
debt replacement reserve funding on capital improvements during 2005 in addition
to the amounts identified in the below schedule.
The Bluffs: The Venture completed approximately $9,000 in capital expenditures
at The Bluffs during the three months ended March 31, 2005, consisting primarily
of floor covering replacements. These improvements were funded from operating
cash flow and replacement reserves. The Venture regularly evaluates the capital
improvement needs of the property and anticipates spending the $300 per unit
allowed under the senior debt replacement reserve funding on capital
improvements during 2005 in addition to the amounts identified in the below
schedule.
Watergate Apartments: The Venture completed approximately $57,000 in capital
expenditures at Watergate Apartments during the three months ended March 31,
2005, consisting primarily of HVAC upgrades, electrical breakers and floor
covering replacements. These improvements were funded from operating cash flow
and replacement reserves. The Venture regularly evaluates the capital
improvement needs of the property and anticipates spending the $300 per unit
allowed under the senior debt replacement reserve funding on capital
improvements during 2005 in addition to the amounts identified in the below
schedule.
Shadowood Apartments: The Venture completed approximately $41,000 in capital
expenditures at Shadowood Apartments during the three months ended March 31,
2005, consisting primarily of fencing, structural improvements and floor
covering replacements. These improvements were funded from operating cash flow
and replacement reserves. The Venture regularly evaluates the capital
improvement needs of the property and anticipates spending the $300 per unit
allowed under the senior debt replacement reserve funding on capital
improvements during 2005 in addition to the amounts identified in the below
schedule.
Vista Village Apartments: The Venture completed approximately $156,000 in
capital expenditures at Vista Village Apartments during the three months ended
March 31, 2005, consisting primarily of floor covering, water heater and balcony
replacements and air conditioning upgrades. These improvements were funded from
operating cash flow and replacement reserves. The Venture regularly evaluates
the capital improvement needs of the property and anticipates spending the $300
per unit allowed under the senior debt replacement reserve funding on capital
improvements during 2005 in addition to the amounts identified in the below
schedule.
Towers of Westchester Park: The Venture completed approximately $168,000 in
capital expenditures at Towers of Westchester Park during the three months ended
March 31, 2005, consisting primarily of furniture and fixture upgrades, interior
painting of common areas and floor covering replacements. These improvements
were funded from operating cash flow and replacement reserves. The Venture
regularly evaluates the capital improvement needs of the property and
anticipates spending the $300 per unit allowed under the senior debt replacement
reserve funding on capital improvements during 2005 in addition to the amounts
identified in the below schedule.
The following schedule summarizes the $6,440,000 of capital improvements that
were identified during 2004 as needing to be made to the properties as a result
of life safety issues, compliance with ADA requirements and general updating of
the properties. As discussed above these improvements will be funded with
proceeds from the New Mezzanine Loan. The amounts indicated as having been
incurred during 2005 related to these approved improvements are included in the
amounts discussed above for each respective property.
Costs Incurred Costs Costs to be
Total Cost of Through Incurred Incurred
Property Improvements December 31, 2004 During 2005 During 2005
North Park Apartments $ 316,000 $ 298,000 $ 18,000 $ --
Chapelle Le Grande 17,000 -- 7,000 10,000
Terrace Gardens 87,000 36,000 33,000 18,000
Forest Ridge Apartments 146,000 41,000 1,000 104,000
Scotchollow 527,000 81,000 25,000 421,000
Pathfinder 260,000 62,000 -- 198,000
Buena Vista Apartments 269,000 103,000 -- 166,000
Mountain View Apartments 719,000 64,000 36,000 619,000
Crosswood Park 963,000 78,000 54,000 831,000
Casa de Monterey 145,000 9,000 -- 136,000
The Bluffs 160,000 11,000 5,000 144,000
Watergate Apartments 418,000 38,000 43,000 337,000
Shadowood Apartments 72,000 3,000 -- 69,000
Vista Village Apartments 785,000 99,000 100,000 586,000
Towers of Westchester Park 1,556,000 123,000 168,000 1,265,000
$6,440,000 $1,046,000 $ 490,000 $4,904,000
The Registrant's 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 $99,352,000 and is being
amortized over 25 years, with a balloon payment of $93,243,000 due January 2008.
Not including the debt discount relating to the mortgage participation
liability, the junior debt, which also matures January 2008, totals
approximately $21,906,000 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 and are only payable
from the proceeds of the sale or refinancing of the properties.
There were no cash distributions to the partners of either of the Ventures for
the three months ended March 31, 2005 and 2004. 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 the
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
Ventures' distribution policies are reviewed on a quarterly basis. In light of
the junior debt requiring payments based on cash flow and the additional capital
expenditures required at the Venture's properties as well as the payments due
under the Venture's Plan of Reorganization, it is not expected that there will
be sufficient funds to be distributed to the Venture's partners in the
foreseeable future.
Other
As a result of tender offers, AIMCO and its affiliates currently own 119 units
of limited partnership interest in Portfolio I representing 18.48% of the
outstanding limited partnership interests, along with the 2% general partner
interest for a combined ownership in Portfolio I of 20.48% at March 31, 2005.
AIMCO and its affiliates currently own 67.42 units of limited partnership
interest in Portfolio II representing 25.25% of the outstanding limited
partnership interests, along with the 2% general partner interest for a combined
ownership in Portfolio II of 27.25% at March 31, 2005. The Venture is owned
70.69% by Portfolio I and 29.31% by Portfolio II which results in AIMCO and its
affiliates currently owning 22.47% of the Venture at March 31, 2005. It is
possible that AIMCO or its affiliates will make one or more additional offers to
acquire additional units of limited partnership interest in the Venture in
exchange for cash or a combination of cash and units in AIMCO Properties, L.P.,
the operating partnership of AIMCO, either through private purchases or tender
offers. 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 Venture
Agreement and voting to remove the Managing General Partner. Although the
Managing General Partner owes fiduciary duties to the limited partners of the
Venture, the Managing General Partner also owes fiduciary duties to AIMCO as its
sole stockholder. As a result, the duties of the Managing General Partner, as
managing general partner, to the Venture and its limited partners may come into
conflict with the duties of the Managing General Partner to AIMCO as its sole
stockholder.
Critical Accounting Policies and Estimates
The combined financial statements are prepared in accordance with accounting
principles generally accepted in the United States which require the Venture to
make estimates and assumptions. The Venture believes that of its significant
accounting policies, the following may involve a higher degree of judgment and
complexity.
Impairment of Long-Lived Assets
Investment properties are recorded at cost, less accumulated depreciation,
unless considered impaired. If events or circumstances indicate that the
carrying amount of a property may be impaired, the Venture will make an
assessment of its recoverability by estimating the undiscounted future cash
flows, excluding interest charges, of the property. If the carrying amount
exceeds the aggregate future cash flows, the Venture would recognize an
impairment loss to the extent the carrying amount exceeds the fair value of the
property.
Real property investments are subject to varying degrees of risk. Several
factors may adversely affect the economic performance and value of the Venture's
investment properties. These factors include, but are not limited to, changes in
the national, regional and local economic climate; local conditions, such as an
oversupply of multifamily properties; competition from other available
multifamily property owners and changes in market rental rates. Any adverse
changes in these factors could cause an impairment in the Venture's assets.
Revenue Recognition
The Venture generally leases apartment units for twelve-month terms or less. The
Venture will offer rental concessions during particularly slow months or in
response to heavy competition from other similar complexes in the area. Rental
income attributable to leases, net of any concessions, is recognized on a
straight-line basis over the term of the lease. The Venture evaluates all
accounts receivable from residents and establishes an allowance, after the
application of security deposits, for accounts greater than 30 days past due on
current tenants and all receivables due from former tenants.
Participating Mortgage Note
The Venture has a participating mortgage note which requires it to record the
estimated fair value of the participation feature as a liability and a debt
discount. The fair value of the participation feature is calculated based upon
information currently available to the Managing General Partner and depends
largely upon the fair value of the collateral properties. These fair values are
determined using the net operating income of the properties capitalized at a
rate deemed reasonable for the type of property adjusted for market conditions,
physical condition of the property and other factors. The Managing General
Partner evaluates the fair value of the participation feature on an annual basis
or as circumstances dictate that it should be analyzed.
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 except for advances made from an affiliate of the Managing
General Partner. These advances bear interest at the prime rate plus three basis
points. Based on interest rates at March 31, 2005, an increase or decrease of
100 basis points in market interest rates would not have a material impact on
the Venture.
The following table summarizes the Venture's debt obligations at March 31, 2005.
The interest rates represent the weighted-average rates. The fair value of the
Venture's first mortgages, after discounting the scheduled loan payments to
maturity, is approximately $103,840,000 at March 31, 2005. However, the Venture
is precluded from refinancing the first mortgage until January 2007. The
Managing General Partner believes that it is not appropriate to use the
Venture's incremental borrowing rate for the second mortgages, as there is
currently no market in which the Venture could obtain similar financing.
Therefore, the Managing General Partner considers estimation of fair value to be
impracticable for this indebtedness.
Long-term Debt
Principal Weighted-average
(in thousands) Interest Rate
2005 $ 1,454 8.50%
2006 2,201 8.50%
2007 2,403 8.50%
2008 115,200 8.95%
$121,258
As principal payments for the junior loans are based upon monthly cash flow, all
principal is assumed to be repaid at maturity.
ITEM 4. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures. The Venture's management, with the
participation of the principal executive officer and principal financial officer
of the Managing General Partner, who are the equivalent of the Venture's
principal executive officer and principal financial officer, respectively, has
evaluated the effectiveness of the Venture's disclosure controls and procedures
(as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the
period covered by this report. Based on such evaluation, the principal executive
officer and principal financial officer of the Managing General Partner, who are
the equivalent of the Venture's principal executive officer and principal
financial officer, respectively, have concluded that, as of the end of such
period, the Venture's disclosure controls and procedures are effective.
(b) Internal Control Over Financial Reporting. There have not been any changes
in the Venture's internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Venture's internal control over
financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
AIMCO Properties L.P. and NHP Management Company, both affiliates of the
Managing General Partner, are defendants in a lawsuit alleging that they
willfully violated the Fair Labor Standards Act ("FLSA") by failing to pay
maintenance workers overtime for all hours worked in excess of forty per week.
The complaint attempts to bring a collective action under the FLSA and seeks to
certify state subclasses in California, Maryland, and the District of Columbia.
Specifically, the plaintiffs contend that AIMCO Properties L.P. and NHP
Management Company failed to compensate maintenance workers for time that they
were required to be "on-call." Additionally, the complaint alleges AIMCO
Properties L.P. and NHP Management Company failed to comply with the FLSA in
compensating maintenance workers for time that they worked in responding to a
call while "on-call." The defendants have filed an answer to the amended
complaint denying the substantive allegations. Oral argument relating to the
certification of the collective action took place on May 12, 2005 and the
parties await a ruling from the Court. Although the outcome of any litigation is
uncertain, AIMCO Properties, L.P. does not believe that the ultimate outcome
will have a material adverse effect on its financial condition or results of
operations. Similarly, the Managing General Partner does not believe that the
ultimate outcome will have a material adverse effect on the Venture's combined
financial condition or results of operations.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
See Exhibit Index.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
VMS NATIONAL PROPERTIES JOINT VENTURE
(Venture)
VMS National Residential Portfolio I
By: MAERIL, Inc.
Managing General Partner
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
By: /s/Stephen B. Waters
Stephen B. Waters
Vice President
VMS National Residential Portfolio II
By: MAERIL, Inc.
Managing General Partner
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
By: /s/Stephen B. Waters
Stephen B. Waters
Vice President
Date: May 20, 2005
VMS NATIONAL PROPERTIES JOINT VENTURE
INDEX OF EXHIBITS
EXHIBIT
3 and 21 Portions of the Prospectus of the Venture dated May
15, 1986 as supplemented by Supplement Numbers 1
through 7 dated December 18, 1986, February 11, 1987,
March 31, 1987, August 19, 1987, January 4, 1988,
April 18, 1988 and June 30, 1988 as filed with the
Commission pursuant to Rule 424(b) and (c), as well
as the Restated Limited Venture Agreement set forth
as Exhibit A to the Prospectus, are hereby
incorporated by reference, specifically pages 15 -
21, 44 - 68, 76, 86 - 90, 106 - 108, A9 - A13, A16 -
A20 and Supplements Numbers 1 and 2.
10.2 Form of Amended, Restated and Consolidated Senior
Secured Promissory Note between the Venture and MF VMS,
L.L.C. relating to each of the Venture's properties.
10.3 Form of Amended, Restated and Consolidated Junior
Secured Promissory Note between the Venture and MF VMS,
L.L.C. relating to each of the Venture's properties.
10.4 (c)(1) Form of Promissory Note, dated November 2, 2004,
issued by VMS National Properties Joint Venture.
Incorporated by reference to the Venture's Form 8-K
dated November 2, 2004 and filed on November 8, 2004.
(c)(2) Form of Master Immediate Repair Agreement, dated as
of November 2, 2004, by and between VMS National
Properties Joint Venture and LaSalle Bank National
Association. Incorporated by reference to the
Venture's Form 8-K dated November 2, 2004 and filed
on November 8, 2004.
(c)(3) Form of General Undertaking Agreement, dated October 29,
2004 and made effective as of November 2, 2004, by and
between VMS National Properties Joint Venture and AIMCO
Properties, L.P. Incorporated by reference to the
Venture's Form 8-K dated November 2, 2004 and filed on
November 8, 2004.
(c)(4) Form of Letter, dated as of November 2, 2004, from GMAC
Commercial Mortgage Corporation. Incorporated by
reference to the Venture's Form 8-K dated November 2,
2004 and filed on November 8, 2004.
(c)(5) Form of First Amendment to Amended, Restated and
Consolidated Senior Mortgage and Security Agreement,
dated October 29, 2004 and made effective as of
November 2, 2004, by and between VMS National
Properties Joint Venture and LaSalle Bank National
Association (relating to the mortgage indebtedness
encumbering Chappelle Le Grande). Incorporated by
reference to the Venture's Form 8-K dated November 2,
2004 and filed on November 8, 2004.
(c)(6) Schedule of Amendments to Senior Mortgage Agreements
Substantially Identical to Exhibit (c)(5). Incorporated
by reference to the Venture's Form 8-K dated November 2,
2004 and filed on November 8, 2004.
VMS NATIONAL PROPERTIES JOINT VENTURE
INDEX OF EXHIBITS (continued)
11 Calculation of Net Loss Per Investor.
31.1 Certification of equivalent of Chief Executive
Officer pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of equivalent of Chief Financial
Officer pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of the equivalent of the Chief
Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
Exhibit 11
VMS NATIONAL PROPERTIES JOINT VENTURE
CALCULATION OF NET LOSS PER INVESTOR
(in thousands, except per partnership interest data)
For the Three Months
Ended March 31,
2005 2004
VMS National Properties net loss $(2,496) $(2,169)
Portfolio I net loss -- --
Portfolio II net loss -- --
Combined net loss $(2,496) $(2,169)
Portfolio I allocation:
70.69% VMS National Properties net loss $(1,764) $(1,533)
100.00% Portfolio I net loss -- --
$(1,764) $(1,533)
Net loss to general partner (2%) $ (35) $ (30)
Net loss to limited partners (98%) $(1,729) $(1,503)
Number of Limited Partner units 644 644
Net loss per limited partnership interest $(2,685) $(2,334)
Portfolio II allocation:
29.31% VMS National Properties net loss $ (732) $ (636)
100.00% Portfolio II net loss -- --
$ (732) $ (636)
Net loss to general partner (2%) $ (15) $ (13)
Net loss to limited partners (98%) $ (717) $ (623)
Number of Limited Partner units 267 267
Net loss per limited partnership interest $(2,685) $(2,333)
Exhibit 31.1
CERTIFICATION
I, Martha L. Long, certify that:
1. I have reviewed this quarterly report on Form 10-Q of VMS National
Properties Joint Venture;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the Venture as of, and for, the periods presented in this report;
4. The Venture's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Venture and
have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
Venture, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period
in which this report is being prepared;
(b) Evaluated the effectiveness of the Venture's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
(c) Disclosed in this report any change in the Venture's internal
control over financial reporting that occurred during the Venture's
most recent fiscal quarter (the Venture's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the Venture's internal
control over financial reporting; and
5. The Venture's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the Venture's auditors and the audit committee of the Venture's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the Venture's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the Venture's
internal control over financial reporting.
Date: May 20, 2005
/s/Martha L. Long
Martha L. Long
Senior Vice President of MAERIL,
Inc., equivalent of the chief
executive officer of the Venture
Exhibit 31.2
CERTIFICATION
I, Stephen B. Waters, certify that:
1. I have reviewed this quarterly report on Form 10-Q of VMS National
Properties Joint Venture;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the Venture as of, and for, the periods presented in this report;
4. The Venture's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Venture and
have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
Venture, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period
in which this report is being prepared;
(b) Evaluated the effectiveness of the Venture's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
(c) Disclosed in this report any change in the Venture's internal
control over financial reporting that occurred during the Venture's
most recent fiscal quarter (the Venture's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the Venture's internal
control over financial reporting; and
5. The Venture's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the Venture's auditors and the audit committee of the Venture's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the Venture's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the Venture's
internal control over financial reporting.
Date: May 20, 2005
/s/Stephen B. Waters
Stephen B. Waters
Vice President of MAERIL, Inc.,
equivalent of the chief financial
officer of the Venture
Exhibit 32.1
Certification of CEO and CFO
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of VMS National Properties
Joint Venture (the "Venture"), for the quarterly period ended March 31, 2005 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), Martha L. Long, as the equivalent of the Chief Executive Officer of
the Venture, and Stephen B. Waters, as the equivalent of the Chief Financial
Officer of the Venture, each hereby certifies, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Venture.
/s/Martha L. Long
Name: Martha L. Long
Date: May 20, 2005
/s/Stephen B. Waters
Name: Stephen B. Waters
Date: May 20, 2005
This certification is furnished with this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Venture for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.