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FORM 10-K--ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required]
For the fiscal year ended December 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
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)
Issuer's telephone number (864) 239-1000
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Units of Limited Partnership Interest
(Title of class)
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the 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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X].
State issuer's revenues for its most recent fiscal year. $31,015,000
State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests, as of December 31, 2000. No market exists for the limited partnership
interests of the Registrant, and, therefore, no aggregate market value can be
determined.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
PART I
Item 1. Description of Business
VMS National Properties Joint Venture (the "Venture" or the "Registrant"), of
which the general partners are VMS National Residential Portfolio I ("Portfolio
I") and VMS National Residential Portfolio II ("Portfolio II"), was formed in
September 1984. Portfolio I and Portfolio II are collectively referred to as the
"Partnerships". The Partnerships are limited partnerships formed in September
1984, under the Uniform Limited Partnership Act of the State of Illinois.
Effective December 12, 1997, the managing general partner of each of the
Partnerships was transferred from VMS Realty Investment, Ltd. ("VMSRIL")
(formerly VMS Realty Partners) to MAERIL, Inc. ("MAERIL" or the "Managing
General Partner"), a wholly-owned subsidiary of MAE GP Corporation ("MAE GP")
and an affiliate of Insignia Financial Group, Inc. ("Insignia"). Effective
February 25, 1998, MAE GP was merged with Insignia Properties Trust ("IPT"),
which was an affiliate of Insignia. Effective October 1, 1998 and February 26,
1999, Insignia and IPT were respectively merged into Apartment Investment and
Management Company ("AIMCO"). Thus, the Managing General Partner is now a
wholly-owned subsidiary of AIMCO.
From the period October 26, 1984, through June 16, 1985, the Partnerships sold
912 Limited Partnership Interests ("Interests") at a price of $150,000 per
Limited Partnership Interest for a total of $136,800,000. The Interests of each
Partnership were offered in reliance upon exemptions from registration under the
Securities Act of 1933, as amended (the "Act"), and Regulation D thereunder. The
participation interest in the Venture of Portfolio I and Portfolio II is
approximately 71% and 29%, respectively. See "Note H" to the combined financial
statements for information as to capital contributions of partners.
The Venture originally acquired 51 residential apartment complexes located
throughout the United Sates. At December 31, 2000, 34 of the Venture's
properties had been foreclosed and two had been sold. The Venture continues to
own and operate the remaining 15 residential apartment complexes (see "Item 2.
Description of Properties").
The Managing General Partner intends to maximize the operating results and,
ultimately, the net realizable value of each of the Venture's properties in
order to achieve the best possible return for the investors. Such results may
best be achieved through property sales, refinancings, debt restructurings or
relinquishment of the assets. The Venture intends to evaluate each of its
holdings periodically to determine the most appropriate strategy for each of the
assets.
The Registrant has no employees. Management and administrative services are
provided by the Managing General Partner and by agents retained by the Managing
General Partner. In addition to day-to-day management of the properties'
operations, affiliates of the Managing General Partner also provide real estate
advisory and asset management services to the Venture. As advisor, such
affiliates provide all partnership accounting and administrative services,
investment management, and supervisory services over property management and
leasing.
The real estate business in which the Registrant is engaged is highly
competitive. There are other residential properties within the market area of
the Registrant's properties. The number and quality of competitive properties,
including those which may be managed by an affiliate of the Managing General
Partner, in such market area could have a material effect on the rental market
for the apartments at the Registrant's properties and the rents that may be
charged for such apartments. While the Managing General Partner and its
affiliates own and/or control a significant number of apartment units in the
United States, such units represent an insignificant percentage of total
apartment units in the United States and competition for the apartments is
local.
Both the income and expenses of operating the properties owned by the Registrant
are subject to factors outside of the Registrant's control, such as changes in
the supply and demand for similar properties resulting from various market
conditions, increases in unemployment or population shifts, changes in the
availability of permanent mortgage financing, changes in zoning laws, or changes
in patterns or needs of users. In addition, there are risks inherent in owning
and operating residential properties because such properties are susceptible to
the impact of economic and other conditions outside of the control of the
Registrant.
There have been, and it is possible there may be other, Federal, state, and
local legislation and regulations enacted relating to the protection of the
environment. The Venture is unable to predict the extent, if any, to which such
new legislation or regulations might occur and the degree to which such existing
or new legislation or regulations might adversely affect the properties owned by
the Venture.
The Venture monitors its properties for evidence of pollutants, toxins and other
dangerous substances, including the presence of asbestos. In certain cases
environmental testing has been performed, which resulted in no material adverse
conditions or liabilities. In no case has the Venture received notice that it is
a potentially responsible party with respect to an environmental clean up site.
As a result of financial difficulties, the Venture filed for Chapter 11
bankruptcy protection in the United States Bankruptcy Court in the Central
District of California on February 22, 1991 (see "Note C" of the combined
financial statements included in "Item 8. Financial Statements and Supplementary
Data"). This voluntary filing encompassed the Venture's non-HUD properties only.
In March 1993, the substance of the Venture's Plan of Reorganization (the
"Plan") was approved by the Bankruptcy Court and a Confirmation Order was
entered and the Plan became effective on September 30, 1993. During 1997, the
Plan was modified in order to allow the Venture to refinance the debt
encumbering its properties. The bankruptcy plan was closed by the Bankruptcy
Court on April 29, 1998.
On December 29, 1997, the Venture refinanced the mortgages encumbering all of
its remaining properties (see "Item 2. Description of Properties" for a further
discussion).
A further description of the Registrant's business is included in "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in "Item 7" of this Form 10-K.
Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998, and
February 26, 1999, Insignia and IPT merged into AIMCO, a publicly traded real
estate investment trust, with AIMCO being the surviving corporation (the
"Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in the
Managing General Partner. The Managing General Partner does not believe that
this transaction has had or will have a material effect on the affairs and
operations of the Venture.
Item 2. Description of Properties
The following table sets forth the Venture's remaining investment in properties:
Date of
Property (1) Purchase Use
North Park Apartments 11/14/84 Apartment
Evansville, IN 284 Units
Chapelle Le Grande 12/05/84 Apartment
Merrillville, IN 105 Units
Terrace Gardens 10/26/84 Apartment
Omaha, NE 126 Units
Forest Ridge Apartments 10/26/84 Apartment
Flagstaff, AZ 278 Units
Scotchollow 10/26/84 Apartment
San Mateo, CA 418 Units
Pathfinders Village 10/26/84 Apartment
Freemont, CA 246 Units
Buena Vista Apartments 10/26/84 Apartment
Pasadena, CA 92 Units
Mountain View Apartments 10/26/84 Apartment
San Dimas, CA 168 Units
Crosswood Park 12/05/84 Apartment
Citrus Heights, CA 180 Units
Casa de Monterey 10/26/84 Apartment
Norwalk, CA 144 Units
The Bluffs 10/26/84 Apartment
Milwaukee, OR 137 Units
Watergate Apartments 10/26/84 Apartment
Little Rock, AR 140 Units
Shadowood Apartments 11/14/84 Apartment
Monroe, LA 120 Units
Vista Village Apartments 10/26/84 Apartment
El Paso, TX 220 Units
Towers of Westchester Park 10/26/84 Apartment
College Park, MD 303 Units
(1) All properties are fee ownership, each subject to a first and second
mortgage.
Schedule of Properties
Set forth below for each of the Registrant's properties is the gross carrying
value, accumulated depreciation, depreciable life, method of depreciation and
Federal tax basis.
Gross
Carrying Accumulated Federal
Property Value Depreciation Method Rate Tax Basis
(in thousands) (in thousands)
North Park Apartments $ 10,594 $ 6,949 SL/200% DBL 5-27.5 yrs $ 1,666
Chapelle Le Grande 5,036 3,188 SL/200% DBL 5-27.5 yrs 908
Terrace Gardens 6,279 3,816 SL/150% and 5-27.5 yrs 1,483
200% DBL
Forest Ridge Apartments 9,302 5,684 SL/150% and 5-27.5 yrs 1,942
200% DBL
Scotchollow 28,844 17,480 SL/150% DBL 5-27.5 yrs 6,627
Pathfinders Village 16,902 9,200 SL/200% DBL 5-27.5 yrs 5,975
Buena Vista Apartments 6,060 3,633 SL/200% DBL 5-27.5 yrs 1,300
Mountain View Apartments 11,042 6,098 SL/200% DBL 5-29 yrs 2,412
Crosswood Park 9,317 5,629 SL/150% DBL 5-29 yrs 2,619
Casa de Monterey 8,376 5,032 SL/200% DBL 5-27.5 yrs 1,918
The Bluffs 4,487 2,961 SL/200% DBL 5-27.5 yrs 638
Watergate Apartments 7,274 4,673 SL/200% DBL 5-27.5 yrs 1,316
Shadowood Apartments 4,441 2,919 SL 5-27.5 yrs 700
Vista Village Apartments 6,948 4,190 SL 5-27.5 yrs 1,493
Towers of Westchester Park 18,200 11,275 SL 5-27.5 yrs 3,798
$153,102 $ 92,727 $ 34,795
See "Note A" of the Notes to the Combined Financial Statements included in "Item
8" for a description of the Venture's depreciation policy and "Note L - Change
in Accounting Principle".
Schedule of Property Indebtedness
The following table sets forth certain information relating to the loans
encumbering the Registrant's properties.
Principal Principal Principal
Balance At Balance At Balance
December 31, December 31, Period Due At
Property 2000 1999 Amortized Maturity
(in thousands) (in thousands)
North Park Apartments
1st mortgage $ 6,135 $ 6,209 25 yrs $ 5,376
2nd mortgage 1,860 1,811 (A) (A)
Chapelle Le Grande Apartments
1st mortgage 3,148 3,184 25 yrs 2,759
2nd mortgage 995 949 (A) (A)
Terrace Gardens Apartments
1st mortgage 4,357 4,405 25 yrs 3,818
2nd mortgage 1,259 1,210 (A) (A)
Forest Ridge Apartments
1st mortgage 5,789 5,854 25 yrs 5,073
2nd mortgage 1,706 1,644 (A) (A)
Scotchollow Apartments
1st mortgage 28,590 28,913 25 yrs 25,054
2nd mortgage 8,415 8,058 (A) (A)
Pathfinders Village Apartments
1st mortgage 13,210 13,370 25 yrs 11,576
2nd mortgage 4,075 3,868 (A) (A)
Buena Vista Apartments
1st mortgage 4,861 4,920 25 yrs 4,260
2nd mortgage 1,360 1,299 (A) (A)
Mountain View Apartments
1st mortgage 7,023 7,108 25 yrs 6,154
2nd mortgage 1,894 1,961 (A) (A)
Crosswood Park Apartments
1st mortgage 5,463 5,530 25 yrs 4,788
2nd mortgage 1,343 1,309 (A) (A)
Casa de Monterey Apartments
1st mortgage 4,024 4,074 25 yrs 3,479
2nd mortgage 1,232 1,178 (A) (A)
The Bluffs Apartments
1st mortgage 3,654 3,695 25 yrs 3,202
2nd mortgage 1,097 1,044 (A) (A)
Watergate Apartments
1st mortgage 2,844 2,878 25 yrs 2,492
2nd mortgage 827 799 (A) (A)
Shadowood Apartments
1st mortgage 2,209 2,236 25 yrs 1,936
2nd mortgage 608 586 (A) (A)
Vista Village Apartments
1st mortgage 3,259 3,299 25 yrs 2,856
2nd mortgage 988 938 (A) (A)
Towers of Westchester Park
Apartments
1st mortgage 11,890 12,035 25 yrs 10,420
2nd mortgage 3,617 3,447 (A) (A)
Totals $137,732 $137,811 $93,243
Interest rates are 8.50% and 10.84% for all first and second mortgages,
respectively. All notes mature January 1, 2008.
(A) Payments based on excess monthly cash flow at each property, with any
unpaid balance due at maturity. Per the junior loan agreements, excess
monthly cash flow is defined as revenue generated from operation of a
property less (1) operating expenses of the property, (2) the debt service
payment for the senior loans, (3) the tax and insurance reserve deposit and
(4) replacement reserve deposit. Pursuant to agreements signed for each of
the Venture's investment properties with the holder of the Senior Loans,
the properties' excess monthly cash flows are first to be used to fund
repair reserves. At December 31, 2000 the reserves were fully funded and
the excess monthly cash flow is being used to make payments on the junior
loans.
Pursuant to the Plan of Reorganization, the mortgages formerly held by the
Federal Deposit Insurance Corporation ("FDIC") were modified effective September
30, 1993. The face value of the notes were restated to agreed valuation amounts.
Under the terms of the modification, the lender may reinstate the full claim
upon the default of any note. As a result, the Venture deferred recognition of a
gain of approximately $54,053,000, which was the difference between the note
face amounts and the agreed valuation amounts of the modified debt.
On December 29, 1997, the Venture refinanced the mortgages encumbering all of
its remaining 15 properties. The refinancing resulted in each property being
encumbered by new senior and junior debt. The senior debt has an interest rate
of 8.5% per annum and require monthly payments of principal and interest. The
junior debt has an interest rate of 10.84% per annum and the monthly payments
are based on excess monthly cash flow for each property. All of the loans mature
on January 1, 2008, and the senior debt include prepayment penalties if paid
prior to January 1, 2007. The senior debt retained similar terms regarding note
face amounts and agreed valuation amounts. These new loans were recorded at the
agreed valuation amount of $110,000,000, which is 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 refinanced note face amounts and the agreed valuation amounts. All the loans
are cross-collateralized but they are not cross-defaulted. Therefore, a default
by one property under the terms of its debt agreements does not in and of itself
create a default under all of the senior and junior debt agreements. However, if
the proceeds upon the sale or refinancing of any property are insufficient to
fully repay the outstanding senior and junior debt related to that property, any
deficiency is to be satisfied from the sale or refinancing of the remaining
properties. As a result of the refinancing, the Venture recognized an
extraordinary gain on extinguishment of debt of approximately $10,303,000, of
which approximately $11,828,000 is the result of a decreased difference between
the note face amounts and agreed valuation amounts for the refinanced mortgage
notes as compared to the old indebtedness. This gain was partially offset by
debt extinguishment costs of approximately $41,000 and the write-off of
discounts and loan costs on the old debt of approximately $1,484,000.
As more fully discussed in "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations", AIMCO Properties, L.P. ("AIMCO
LP"), which owns the Managing General Partner and which is a controlled
affiliate of AIMCO, purchased (i) the junior loans on November 19, 1999, and
(ii) a significant interest in the residual value of the properties on November
16, 1999. These transactions occurred between AIMCO LP and an unrelated third
party and thus had no effect on the combined financial statements of the
Venture.
Rental Rates and Occupancy
The following table sets forth the average annual rental rates and occupancy for
2000 and 1999 for each property.
Average Annual Average
Rental Rates Per Unit Occupancy
Property 2000 1999 2000 1999
North Park Apartments $ 6,484 $ 6,312 93% 95%
Chapelle Le Grande 8,376 8,277 93% 92%
Terrace Gardens 9,649 9,268 94% 97%
Forest Ridge Apartments 7,499 7,464 97% 95%
Scotchollow 16,333 15,451 99% 93%
Pathfinders Village 15,692 14,586 98% 92%
Buena Vista Apartments 14,715 13,310 97% 99%
Mountain View Apartments 12,294 11,213 98% 98%
Crosswood Park 10,034 9,435 96% 96%
Casa de Monterey 9,129 8,384 98% 98%
The Bluffs 7,253 7,066 93% 94%
Watergate Apartments 7,472 7,343 92% 91%
Shadowood Apartments 6,729 6,548 94% 95%
Vista Village Apartments 6,587 6,415 90% 93%
Towers of Westchester Park 12,161 11,645 97% 98%
The Managing General Partner attributes the occupancy fluctuations at the
properties to the following: a decrease at Terrace Gardens due to tenants
purchasing homes; an increase at Scotchollow and Pathfinders Village due to more
aggressive marketing; a decrease at Vista Village Apartments due to a slow
market in the El Paso, Texas area.
As noted under "Item 1. Description of Business", the real estate industry is
highly competitive. All of the properties are subject to competition from other
residential apartment complexes in the area. The Managing General Partner
believes that all of the properties are adequately insured. Each property is an
apartment complex which leases units for lease terms of one year or less. No
residential tenant leases 10% or more of the available rental space.
Real Estate Taxes and Rates
Real estate taxes and rates in 2000 and 1999 for each property were as follows:
2000 2000 1999 1999
Taxes Rate Taxes Rate
(in thousands) (in thousands)
North Park Apartments $150 9.60% $149 9.42%
Chapelle Le Grande 60 14.45% 53 12.88%
Terrace Gardens 72 1.91% 82 2.17%
Forest Ridge Apartments 96 10.11% 88 10.00%
Scotchollow 353 1.29% 340 1.27%
Pathfinders Village 211 1.39% 215 1.43%
Buena Vista Apartments 73 1.22% 71 1.22%
Mountain View Apartments 120 1.20% 118 1.20%
Crosswood Park 86 1.05% 86 1.05%
Casa de Monterey 63 1.25% 63 1.24%
The Bluffs 69 1.48% 69 1.32%
Watergate Apartments 53 6.30% 54 6.39%
Shadowood Apartments 44 12.10% 32 12.52%
Vista Village Apartments 84 2.88% 107 2.95%
Towers of Westchester Park 224 3.74% 212 3.69%
Capital Improvements
The Venture is restricted to annual capital improvements of $300 per unit for
all of the properties, which is the limit set by the Junior Debt for funding of
capital improvements. The Venture, the holder ("AIMCO LP") of the Junior Debt
encumbering the properties and the servicer of the Senior Debt encumbering the
properties have agreed to a procedure to assess whether or not capital
expenditures, in addition to those permitted under the $300 per unit minimum,
are needed at the properties and the methodology for funding any such capital
expenditures. The parties agreed upon the required capital expenditures and that
these costs would be funded out of the cash flows from the properties that
otherwise would be utilized to pay debt service on the Junior Debt. As a result,
the balloon payment due on the Junior Debt may be higher at their maturity in
January 2008 as accrued but unpaid interest is rolled into the principal
balance. In November 1999, an agreement was signed relating to the required
capital expenditures at Towers of Westchester Park. In July 2000, similar
agreements were signed relating to North Park Apartments, Scotchollow,
Pathfinder, Buena Vista Apartments, Mountain View Apartments, Casa de Monterey
and The Bluffs. In August 2000, agreements were signed relating to Shadowood
Apartments, Crosswood Park Apartments, Vista Village Apartments, Watergate
Apartments, Chapelle Le Grande Apartments, and Forest Ridge Apartments and in
September 2000, an agreement was signed relating to Terrace Gardens Apartments.
North Park Apartments: The methodology discussed above for funding the required
capital expenditures has been applied to North Park Apartments. The parties
agreed that this property required capital expenditures which are to be
completed by June 30, 2001 and which were estimated to cost approximately
$150,000, of which approximately $90,000 has been completed as of December 31,
2000. These costs were to be funded out of cash flows from the properties that
otherwise would be utilized to pay debt service on the junior debt. As of
December 31, 2000, this amount has been fully funded. The Venture completed
approximately $119,000 in capital expenditures, including the aforementioned
capital expenditures, at North Park Apartments during the year ended December
31, 2000, consisting primarily of appliance, air conditioning and flooring
replacements and swimming pool, electrical and parking lot upgrades. These
improvements were funded from operating cash flow and replacement reserves. The
Venture is currently evaluating the capital improvement needs of the property
for the upcoming year. The minimum amount to be budgeted is expected to be $275
per unit or $78,100. Additional improvements may be considered and will depend
on the physical condition of the property as well as replacement reserves and
anticipated cash flow generated by the property.
Chapelle Le Grande: The methodology discussed above for funding the required
capital expenditures has been applied to Chapelle Le Grande. The parties agreed
that this property required capital expenditures which are to be completed by
June 30, 2001 and which were estimated to cost approximately $90,000, of which
approximately $39,000 has been completed as of December 31, 2000. These costs
were to be funded out of cash flows from the properties that otherwise would be
utilized to pay debt service on the junior debt. As of December 31, 2000, this
amount has been fully funded. The Venture completed approximately $181,000 in
capital expenditures, including the aforementioned capital expenditures, at
Chapelle Le Grande during the year ended December 31, 2000, consisting primarily
of roof, appliance, air conditioning and flooring replacements and structural
upgrades. These improvements were funded from operating cash flow and
replacement reserves. The Venture is currently evaluating the capital
improvement needs of the property for the upcoming year. The minimum amount to
be budgeted is expected to be $275 per unit or $28,875. Additional improvements
may be considered and will depend on the physical condition of the property as
well as replacement reserves and anticipated cash flow generated by the
property.
Terrace Gardens: The methodology discussed above for funding the required
capital expenditures has been applied to Terrace Gardens. The parties agreed
that this property required capital expenditures which are to be completed by
June 30, 2001 and which were estimated to cost approximately $433,000, none of
which were completed as of December 31, 2000. These costs were to be funded out
of cash flows from the properties that otherwise would be utilized to pay debt
service on the junior debt. As of December 31, 2000, this amount has been fully
funded. The Venture completed approximately $91,000 in other capital
expenditures at Terrace Gardens during the year ended December 31, 2000,
consisting primarily of air conditioning, water heater and flooring replacements
and structural and other building improvements. These improvements were funded
from operating cash flow and replacement reserves. The Venture is currently
evaluating the capital improvement needs of the property for the upcoming year.
The minimum amount to be budgeted is expected to be $275 per unit or $34,650.
Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
Forest Ridge Apartments: The methodology discussed above for funding the
required capital expenditures has been applied to Forest Ridge Apartments. The
parties agreed that this property required capital expenditures which are to be
completed by June 30, 2001 and which were estimated to cost approximately
$296,000, of which approximately $265,000 has been completed as of December 31,
2000. These costs were to be funded out of cash flows from the properties that
otherwise would be utilized to pay debt service on the junior debt. As of
December 31, 2000, this amount has been fully funded. The Venture completed
approximately $427,000 in capital expenditures, including the aforementioned
capital expenditures, at Forest Ridge Apartments during the year ended December
31, 2000, consisting primarily of appliance, cabinet, water heater, and flooring
replacements, exterior painting, building and parking lot improvements and
landscaping. These improvements were funded from operating cash flow and
replacement reserves. The Venture is currently evaluating the capital
improvement needs of the property for the upcoming year. The minimum amount to
be budgeted is expected to be $275 per unit or $76,450. Additional improvements
may be considered and will depend on the physical condition of the property as
well as replacement reserves and anticipated cash flow generated by the
property.
Scotchollow: The methodology discussed above for funding the required capital
expenditures has been applied to Scotchollow. The parties agreed that this
property required capital expenditures which are to be completed by June 30,
2001 and which were estimated to cost approximately $759,000, of which
approximately $325,000 has been completed as of December 31, 2000. These costs
were to be funded out of cash flows from the properties that otherwise would be
utilized to pay debt service on the junior debt. As of December 31, 2000, this
amount has been fully funded. The Venture completed approximately $163,000 in
capital expenditures, including the aforementioned capital expenditures, at
Scotchollow during the year ended December 31, 2000, consisting primarily of
appliance, fencing, plumbing and flooring replacements and building and
structural improvements. These improvements were funded from operating cash flow
and replacement reserves. The Venture is currently evaluating the capital
improvement needs of the property for the upcoming year. The minimum amount to
be budgeted is expected to be $275 per unit or $114,950. Additional improvements
may be considered and will depend on the physical condition of the property as
well as replacement reserves and anticipated cash flow generated by the
property.
Pathfinders Village: The methodology discussed above for funding the required
capital expenditures has been applied to Pathfinders Village. The parties agreed
that this property required capital expenditures which are to be completed by
June 30, 2001 and which were estimated to cost approximately $1,369,000, of
which approximately $845,000 has been completed as of December 31, 2000. These
costs were to be funded out of cash flows from the properties that otherwise
would be utilized to pay debt service on the junior debt. As of December 31,
2000, this amount has been fully funded. The Venture completed approximately
$859,000 in capital expenditures, including the aforementioned capital
expenditures, at Pathfinders Village during the year ended December 31, 2000,
consisting primarily of clubhouse renovations, air conditioning, cabinet, window
dressing, appliance and flooring replacements and structural and other building
improvements. These improvements were funded from operating cash flow and
replacement reserves. The Venture is currently evaluating the capital
improvement needs of the property for the upcoming year. The minimum amount to
be budgeted is expected to be $275 per unit or $67,650. Additional improvements
may be considered and will depend on the physical condition of the property as
well as replacement reserves and anticipated cash flow generated by the
property.
Buena Vista Apartments: The methodology discussed above for funding the required
capital expenditures has been applied to Buena Vista Apartments. The parties
agreed that this property required capital expenditures which are to be
completed by June 30, 2001 and which were estimated to cost approximately
$175,000, none of which were completed as of December 31, 2000. These costs were
to be funded out of cash flows from the properties that otherwise would be
utilized to pay debt service on the junior debt. As of December 31, 2000, this
amount has been fully funded. The Venture completed approximately $66,000 in
other capital expenditures at Buena Vista Apartments during the year ended
December 31, 2000, consisting primarily of furniture, fixtures and appliance,
lighting and flooring replacements. These improvements were funded from
operating cash flow and replacement reserves. The Venture is currently
evaluating the capital improvement needs of the property for the upcoming year.
The minimum amount to be budgeted is expected to be $275 per unit or $25,300.
Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
Mountain View Apartments: The methodology discussed above for funding the
required capital expenditures has been applied to Mountain View Apartments. The
parties agreed that this property required capital expenditures which are to be
completed by June 30, 2001 and which were estimated to cost approximately
$234,000, of which approximately $68,000 has been completed as of December 31,
2000. These costs were to be funded out of cash flows from the properties that
otherwise would be utilized to pay debt service on the junior debt. As of
December 31, 2000, this amount has been fully funded. The Venture completed
approximately $196,000 in capital expenditures, including the aforementioned
capital expenditures, at Mountain View Apartments during the year ended December
31, 2000, consisting primarily of appliance, furniture, lighting and flooring
replacements, structural and land improvements, recreational facilities, and
parking lot upgrades. These improvements were funded from operating cash flow
and replacement reserves. The Venture is currently evaluating the capital
improvement needs of the property for the upcoming year. The minimum amount to
be budgeted is expected to be $275 per unit or $46,200. Additional improvements
may be considered and will depend on the physical condition of the property as
well as replacement reserves and anticipated cash flow generated by the
property.
Crosswood Park: The methodology discussed above for funding the required capital
expenditures has been applied to Crosswood Park. The parties agreed that this
property required capital expenditures which are to be completed by June 30,
2001 and which were estimated to cost approximately $301,000, of which
approximately $222,000 has been completed as of December 31, 2000. These costs
were to be funded out of cash flows from the properties that otherwise would be
utilized to pay debt service on the junior debt. As of December 31, 2000, this
amount has been fully funded. The Venture completed approximately $146,000 in
capital expenditures, including the aforementioned capital expenditures, at
Crosswood Park during the year ended December 31, 2000, consisting primarily of
appliance, air conditioning, plumbing and flooring replacements and structural
improvements. These improvements were funded from operating cash flow and
replacement reserves. The Venture is currently evaluating the capital
improvement needs of the property for the upcoming year. The minimum amount to
be budgeted is expected to be $275 per unit or $49,500. Additional improvements
may be considered and will depend on the physical condition of the property as
well as replacement reserves and anticipated cash flow generated by the
property.
Casa de Monterey: The methodology discussed above for funding the required
capital expenditures has been applied to Casa de Monterey. The parties agreed
that this property required capital expenditures which are to be completed by
June 30, 2001 and which were estimated to cost approximately $378,000, of which
approximately $163,000 has been completed as of December 31, 2000. These costs
were to be funded out of cash flows from the properties that otherwise would be
utilized to pay debt service on the junior debt. As of December 31, 2000, this
amount has been fully funded. The Venture completed approximately $284,000 in
capital expenditures, including the aforementioned capital expenditures, at Casa
de Monterey during the year ended December 31, 2000, consisting primarily of
appliance, air conditioning, lighting, cabinet and flooring replacements and
structural improvements. These improvements were funded from operating cash flow
and replacement reserves. The Venture is currently evaluating the capital
improvement needs of the property for the upcoming year. The minimum amount to
be budgeted is expected to be $275 per unit or $39,600. Additional improvements
may be considered and will depend on the physical condition of the property as
well as replacement reserves and anticipated cash flow generated by the
property.
The Bluffs: The methodology discussed above for funding the required capital
expenditures has been applied to The Bluffs. The parties agreed that this
property required capital expenditures which are to be completed by June 30,
2001 and which were estimated to cost approximately $52,000, none of which were
completed as of December 31, 2000. These costs were to be funded out of cash
flows from the properties that otherwise would be utilized to pay debt service
on the junior debt. As of December 31, 2000 this amount has been fully funded.
The Venture completed approximately $113,000 in other capital expenditures at
The Bluffs during the year ended December 31, 2000, consisting primarily of
appliance, plumbing and flooring replacements and a water delivery system which
allows tenants to be billed for water usage. These improvements were funded from
operating cash flow and replacement reserves. The Venture is currently
evaluating the capital improvement needs of the property for the upcoming year.
The minimum amount to be budgeted is expected to be $275 per unit or $37,675.
Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
Watergate Apartments: The methodology discussed above for funding the required
capital expenditures has been applied to Watergate Apartments. The parties
agreed that this property required capital expenditures which are to be
completed by June 30, 2001 and which were estimated to cost approximately
$186,000. There have been no capital expenditures completed as of December 31,
2000. These costs were to be funded out of cash flows from the properties that
otherwise would be utilized to pay debt service on the junior debt. As of
December 31, 2000, this amount has been fully funded. The Venture completed
approximately $139,000 in capital expenditures, including the aforementioned
capital expenditures, at Watergate Apartments during the year ended December 31,
2000, consisting primarily of appliance, plumbing, air conditioning and flooring
replacements and structural upgrades. These improvements were funded from
operating cash flow and replacement reserves. The Venture is currently
evaluating the capital improvement needs of the property for the upcoming year.
The minimum amount to be budgeted is expected to be $275 per unit or $38,500.
Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
Shadowood Apartments: The methodology discussed above for funding the required
capital expenditures has been applied to Shadowood Apartments. The parties
agreed that this property required capital expenditures which are to be
completed by June 30, 2001 and which were estimated to cost approximately
$151,000, of which approximately $148,000 has been completed as of December 31,
2000. These costs were to be funded out of cash flows from the properties that
otherwise would be utilized to pay debt service on the junior debt. As of
December 31, 2000, this amount has been fully funded. The Venture completed
approximately $105,000 in capital expenditures, including the aforementioned
capital expenditures, at Shadowood Apartments during the year ended December 31,
2000, consisting primarily of furniture and fixtures, appliance, plumbing and
flooring replacements and exterior painting. These improvements were funded from
operating cash flow and replacement reserves. The Venture is currently
evaluating the capital improvement needs of the property for the upcoming year.
The minimum amount to be budgeted is expected to be $275 per unit or $33,000.
Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
Vista Village Apartments: The methodology discussed above for funding the
required capital expenditures has been applied to Vista Village Apartments. The
parties agreed that this property required capital expenditures which are to be
completed by June 30, 2001 and which were estimated to cost approximately
$264,000, of which approximately $41,000 has been completed as of December 31,
2000. These costs were to be funded out of cash flows from the properties that
otherwise would be utilized to pay debt service on the junior debt. As of
December 31, 2000, this amount has been fully funded. The Venture completed
approximately $127,000 in capital expenditures, including the aforementioned
capital expenditures, at Vista Village Apartments during the year ended December
31, 2000, consisting primarily of appliance, air conditioning and flooring
replacements, recreation facility and major landscaping, and other improvements.
These improvements were funded from operating cash flow and replacement
reserves. The Venture is currently evaluating the capital improvement needs of
the property for the upcoming year. The minimum amount to be budgeted is
expected to be $275 per unit or $60,500. Additional improvements may be
considered and will depend on the physical condition of the property as well as
replacement reserves and anticipated cash flow generated by the property.
Towers of Westchester Park: The methodology discussed above for funding the
required capital expenditures has been applied to Towers of Westchester Park.
The parties agreed that this property required capital expenditures during 2000
which were estimated to cost approximately $920,000, of which approximately
$920,000 has been completed as of December 31, 2000. These costs were funded out
of cash flows from the properties that otherwise would have been utilized to pay
debt service on the junior debt. As of December 31, 2000, this amount has been
fully funded. The Venture completed approximately $1,602,000 in capital
expenditures, including the aforementioned capital expenditures, at Towers of
Westchester Park during the year ended December 31, 2000, consisting primarily
of appliance, air conditioning, electrical, cabinet, heating, water heater,
light fixture, plumbing and flooring replacements, major landscaping, and
parking lot, pool and structural improvements. These improvements were funded
from operating cash flow and replacement reserves. The Venture is currently
evaluating the capital improvement needs of the property for the upcoming year.
The minimum amount to be budgeted is expected to be $275 per unit or $83,325.
Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
The Venture has budgeted a minimum of $275 per unit or $814,275 for all of the
properties which is less than the limit set by the second mortgage notes for
funding of capital improvements. As the Venture identifies properties which
require additional improvements discussions are held with the holders of both
the first and second mortgage notes for approval to perform agreed upon capital
improvements.
Item 3. Legal Proceedings
The Venture is unaware of any pending or outstanding litigation that is not of a
routine nature arising in the ordinary course of business.
Item 4. Submission of Matters to a Vote of Security Holders
The unit holders of the Partnerships did not vote on any matter during the
quarter ended December 31, 2000.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholders
Matters
From the period October 26, 1984, through June 16, 1985, Portfolio I and
Portfolio II sold a total of 912 Limited Partnership Interests at a price of
$150,000 per Limited Partnership Interest, for a total of $136,800,000. As of
December 31, 2000, there were 770 holders of record of Portfolio I and 297
holders of record of Portfolio II, owning 644 and 267 units, respectively. As of
December 31, 1999, there were 795 holders of record of Portfolio I and 313
holders of record of Portfolio II, owning a total of 644 and 267 units,
respectively. As of December 31, 1998, there were 823 holders of record or
Portfolio I and 332 holders of record of Portfolio II, owning a total of 644 and
267 units, respectively. No public trading market has developed for the Units,
and it is not anticipated that such a market will develop in the future.
There were no cash distributions to the partners of either of the Partnerships
for the years ended December 31, 2000, 1999, and 1998. In accordance with the
respective Agreements of Limited Partnership, there are no material restrictions
on the Partnerships' ability to make cash distributions; however, future cash
distributions are subject to the order of distributions as stipulated by the
Venture's Plan of Reorganization. Future cash distributions will depend on the
levels of net cash generated from operations, the availability of cash reserves
and the timing of debt maturities, refinancings and/or property sales. The
Partnerships' distribution policies are reviewed on an annual basis. There can
be no assurance that the Partnerships will generate sufficient funds from
operations, after required capital expenditures and the order of distributions
as stipulated by the Venture's Plan of Reorganization, to permit any
distributions to their partners in 2001 or subsequent periods. See "Item 2.
Description of Properties - Capital Improvements" for information relating to
anticipated capital expenditures at the properties.
As a result of tender offers, AIMCO and its affiliates currently own 39.75 units
of limited partnership interest in Portfolio I representing 6.17% of the
outstanding limited partnership interests, along with the 2% general partner
interest for a combined ownership in Portfolio I of 8.17%. AIMCO and its
affiliates currently own 31 units of limited partnership interest in Portfolio
II representing 11.61% of the outstanding limited partnership interests, along
with the 2% general partner interest for a combined ownership in Portfolio II of
13.61%. The Venture is owned 70.69% by Portfolio I and 29.31% by Portfolio II
which results in AIMCO and its affiliates currently owning 9.18% of the Venture.
It is possible that AIMCO or its affiliates will make one or more additional
offers to acquire additional limited partnership interests in the Partnerships
for cash or in exchange for units in the operating partnership of AIMCO. Under
the Partnership Agreements, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters, which would
include without limitation, voting on certain amendments to the Partnership
Agreements and voting to remove the Managing General Partner. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the Managing General Partner because of its
affiliation with the Managing General Partner.
Item 6. Selected Financial Data (in thousands, except per interest data):
2000 1999 1998 1997 1996
Total revenues from rental
operations $ 31,015 $ 28,658 $ 27,956 $ 25,577 $ 25,001
Extraordinary item-gain on
extinguishment of debt $ -- $ -- $ -- $ 10,303 (B) $ 14,095 (A)
Net (loss) income $ (40) $ (6,402) $ (6,958) $ 606 $ 1,823
Net (loss) income per limited
Partnership interest
Portfolio I - 644 interests $ (43) $ (6,842) $ (7,483) $ 654 $ 1,961 (A)
Portfolio II (C) $ (45) $ (6,992) $ (7,493) $ 646 $ 1,953 (A)
Total assets $ 68,879 $ 68,445 $ 71,937 $ 73,542 $ 76,779
Mortgage loans and notes $179,792 $179,468 $177,190 $172,904 $153,066
A) During 1996 two of the Venture's nonretained properties were foreclosed.
As a result of these events, the Venture recognized extraordinary gains on
the extinguishment of the related debt. As of December 31, 1996, all of
the nonretained properties had been foreclosed upon
B) During 1997, all of the Venture's properties were refinanced. As a result,
the Venture recognized an extraordinary gain on the extinguishment of
debt.
C) 267 interests at December 31, 2000, 1999, 1998, and 1997. 268 interests as
of December 31, 1996. During 1997, one Partnership interest was abandoned.
In abandoning Partnership Units, a limited partner relinquishes all right,
title and interest in the Partnership as of the date of abandonment.
However, during the year of abandonment, the Limited Partner will still be
allocated his or her share of the income or loss for that year.
The above selected financial data should be read in conjunction with the
combined financial statements and the related notes.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The matters discussed in this Form 10-K contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-K and the other filings with the Securities and
Exchange Commission made by the Registrant from time to time. The discussion of
the Registrant's business and results of operations, including forward-looking
statements pertaining to such matter, does not take into account the effects of
any changes to the Registrant's business and results of operation. Accordingly,
actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.
This item should be read in conjunction with the combined financial statements
and other items contained elsewhere in this report.
Results from Operations
2000 Compared with 1999
The Venture recorded a net loss for the twelve months ended December 31, 2000 of
approximately $40,000 as compared to a net loss of approximately $6,402,000 for
the corresponding period in 1999 (see "Note J" of the combined financial
statements for a reconciliation of these amounts to the Registrant's federal
taxable income (loss)). The decrease in net loss is attributable to an increase
in total revenues and a decrease in total expenses. The increase in total
revenues is due to an increase in both rental and other income. Rental income
increased mainly due to an increase in average annual rental rates at all of the
Venture's investment properties despite decreases in occupancy at seven of the
investment properties. Other income increased primarily due to increases in
interest income and tenant auxiliary services.
Total expenses decreased primarily due to a reduction in interest expense which
more than offset an increase in operating expenses and property management fees.
Interest expense decreased due to a reduction in the amortization of the imputed
interest on the Venture's Assignment Note. This discount for imputed interest
became fully amortized during January 2000, which was the estimated maturity
date of the Assignment Note. Operating expenses increased due to an increase in
property expenses. The increase in property expense is primarily a result of an
increase in salary and related benefits, especially at Scotchollow. In addition,
there was an increase in utilities, especially gas, due to price increases and
an unusually cold November and December.
Included in general and administrative expenses for the twelve months ended
December 31, 2000, are reimbursements to the Managing General Partner allowed
under the Partnership Agreement associated with its management of the Venture.
Costs associated with the quarterly and annual communications with investors and
regulatory agencies and the annual audit required by the Partnership Agreement
are also included.
As part of the ongoing business plan of the Venture, the Managing General
Partner monitors the rental market environment of each of its investment
properties within the Venture to assess the feasibility of increasing rents,
maintaining or increasing occupancy levels and protecting the Venture from
increases in expenses. As part of this plan, the Managing General Partner
attempts to protect the Venture from the burden of inflation-related increases
in expenses by increasing rents and maintaining a high overall occupancy level.
However, due to changing market conditions, which can result in the use of
rental concessions and rental reductions to offset softening market conditions,
there is no guarantee that the Managing General Partner will be able to sustain
such a plan.
1999 Compared with 1998
The Venture recorded a net loss for the twelve months ended December 31, 1999 of
approximately $6,402,000 as compared to a net loss of approximately $6,958,000
for the corresponding period in 1998. (See "Note J" of the combined financial
statements for a reconciliation of these amounts to the Registrant's federal
taxable income (loss)). The decrease in net loss is primarily attributable to an
increase in total revenues. The increase in total revenues is due to an increase
in rental income which is partially offset by the recording of a casualty gain
for the twelve months ended December 31, 1998. No such gain was recorded for the
twelve months ended December 31, 1999. Rental income increased mainly due to an
increase in average annual rental rates at all fifteen of the Venture's
investment properties along with occupancy increases at six of the properties,
which more than offset the decreases at five other properties. A casualty gain
of approximately $279,000 was recorded during the year ended December 31, 1998
in connection with a fire that damaged eight of the 246 units at Pathfinder
Village.
Total expenses increased primarily due to an increase in depreciation, interest
and property tax expenses, which more than offset the decrease in operating
expenses and, to a lesser extent, the fact that no loss on disposal of property
was recorded during the year ended December 31, 1999, as was the case for the
year ended December 31, 1998. Interest expense increased due to an increase in
the principal balance of outstanding notes payable. Property tax expense
increased due to an increase in property tax rates at Buena Vista Apartments,
Crosswood Park, The Bluffs, Chapelle Le Grande, and Shadowood Apartments.
Depreciation expense increased as the result of depreciation taken on property
improvements and replacements placed into service for 1999. Operating expense
decreased primarily due to a decrease in insurance expense at all of the
Venture's investment properties as a result of a change in insurance carriers.
Operating expense for 1998 included parking lot repairs at Scotchollow combined
with exterior building improvements at Crosswood Park, North Park, Watergate,
Pathfinder and Shadowood Apartments. In addition, all of the properties
completed interior painting projects in 1998. The loss on disposal of property
for the year ended December 31, 1998 resulted from the write-off of roofs that
were not fully depreciated at the time of roof replacement projects at Chapelle
Le Grande, Pathfinder, Casa de Monterey and Mountain View. No such loss was
recorded during the twelve months ended December 31, 1999.
General and administrative expense decreased for the year ended December 31,
1999 compared to the year ended December 31, 1998 primarily due to the payment
of a trustee fee for the year ended December 31, 1998 in connection with the
1997 modification of the Venture's bankruptcy plan, which allowed the Senior and
Junior Debts to be refinanced. Included in general and administrative expenses
for the year ended December 31, 1999 and 1998 are reimbursements to the Managing
General Partner allowed under the Partnership Agreement associated with its
management of the Venture. Costs associated with the quarterly and annual
communications with investors and regulatory agencies and the annual audit
required by the Partnership Agreement are also included.
Effective January 1, 1999, the Venture changed its method of accounting to
capitalize the cost of exterior painting and major landscaping on a prospective
basis. The Partnership believes that this accounting principle change is
preferable because it provides a better matching of expenses with the related
benefit of the expenditures and it is consistent with industry practice and the
policies of the Managing General Partner. The effect of the change in 1999 was
to decrease the net loss by approximately $66,000 ($71.00 per limited
partnership interest for both Portfolio I and II). The cumulative effect, had
this change been applied to prior periods, is not material. The accounting
principle change will not have an effect on cash flow, funds available for
distribution or fees payable to the Managing General Partner and affiliates.
As part of the ongoing business plan of the Venture, the Managing General
Partner monitors the rental market environment of each of its investment
properties to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting the Venture from increases in
expenses. As part of this plan, the Managing General Partner attempts to protect
the Venture from the burden of inflation-related increases in expenses by
increasing rents and maintaining a high overall occupancy level. However, due to
changing market conditions, which can result in the use of rental concessions
and rental reductions to offset softening market conditions, there is no
guarantee that the Managing General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At December 31, 2000, the Venture had cash and cash equivalents of approximately
$2,153,000 as compared to approximately $2,004,000 at December 31, 1999, an
increase of approximately $149,000. The increase in cash and cash equivalents is
the result of approximately $8,647,000 of cash provided by operating activities
which was offset by approximately $5,817,000 of cash used in investing
activities and approximately $2,681,000 of cash used in financing activities.
Cash used in investing activities consisted of property improvements and
replacements and net deposits to escrow accounts maintained by the mortgage
lender. Cash used in financing activities consisted of principal payments made
on the mortgages encumbering the Registrant's properties and receipts of
payments on subscription notes. The Venture invests its working capital reserves
in interest-bearing accounts.
At December 31, 1999, the Venture had cash and cash equivalents of approximately
$2,004,000 as compared to approximately $931,000 at December 31, 1998, an
increase of approximately $1,073,000. The increase in cash and cash equivalents
is the result of approximately $6,260,000 of cash provided by operating
activities and was partially offset by approximately $3,345,000 of cash used in
financing activities and approximately $1,842,000 of cash used in investing
activities. Cash used in financing activities consisted of payments of principal
made on the mortgages encumbering the Registrant's properties. Cash used in
investing activities consisted primarily of property improvements and
replacements and was slightly offset by net withdrawals from escrow accounts
maintained by the mortgage lender. The Venture invests its working capital
reserves in a money market account.
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 Venture had budgeted a minimum of $275 per unit or $814,275 for all of the
properties. The Venture's Junior Debt restricts capital expenditures from
exceeding $300 per unit annually for all of the properties. The Venture, the
holder ("AIMCO LP") of the Junior Debt encumbering the properties and the
servicer of the Senior Debt encumbering the properties have agreed to a
procedure to assess whether or not capital expenditures, in addition to those
permitted under the $300 per unit minimum, are needed at the properties and the
methodology for funding any such capital expenditures. The parties agreed upon
the required capital expenditures and that these costs would be funded out of
the cash flows from the properties that otherwise would be utilized to pay debt
service on the Junior Debt. As a result, the balloon payment due on the Junior
Debt may be higher at their maturity in January 2008 as accrued but unpaid
interest is rolled into the principal balance.
On December 29, 1997, the Venture refinanced the mortgages encumbering all of
its remaining 15 properties. The refinancing resulted in each property being
encumbered by new senior and junior debt. The senior debt has an interest rate
of 8.5% per annum and require monthly payments of principal and interest. The
junior debt has an interest rate of 10.84% per annum and the monthly payments
are based on excess monthly cash flow for each property. All of the loans mature
on January 1, 2008, and the senior debt include prepayment penalties if paid
prior to January 1, 2007. The senior debt retained similar terms regarding note
face amounts and agreed valuation amounts. These new loans were recorded at the
agreed valuation amount of $110,000,000, which is 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 refinanced note face amounts and the agreed valuation amounts. All the loans
are cross-collateralized but they are not cross-defaulted. Therefore, a default
by one property under the terms of its debt agreements does not in and of itself
create a default under all of the senior and junior debt agreements. However, if
the proceeds upon the sale or refinancing of any property are insufficient to
fully repay the outstanding senior and junior debt related to that property, any
deficiency is to be satisfied from the sale or refinancing of the remaining
properties. As a result of the refinancing, the Venture recognized an
extraordinary gain on extinguishment of debt of approximately $10,303,000, of
which approximately $11,828,000 is the result of a decreased difference between
the note face amounts and agreed valuation amounts for the refinanced mortgage
notes as compared to the old indebtedness. This gain was partially offset by
debt extinguishment costs of approximately $41,000 and the write-off of
discounts and loan costs on the old debt of approximately $1,484,000. The
reduction in the deferred gain on extinguishment of debt results from the
reduction of the difference between the aggregate note face amounts and the
aggregate agreed valuation amounts. Under the terms of the old notes, the
aggregate note face amounts exceeded the aggregate valuation amounts by
$54,053,000. Under the terms of the new notes, the aggregate note face amounts
exceed the aggregate agreed valuation amounts by approximately $42,225,000.
Both on a short-term and long-term basis, the Managing General Partner monitors
the rental market environment of each of the investment properties to assess the
feasibility of increasing rents, maintaining or increasing occupancy levels and
protecting the Venture from increases in expenses all of which have an impact on
the Venture's liquidity. The Venture's current assets are thought to be
sufficient for any short-term needs (exclusive of capital improvements, as
discussed above and below) of the Venture. The Senior Debt encumbering all of
the properties totals approximately $106,456,000 and is being amortized over 25
years, with a balloon payment of $93,243,000 due January 2008. The Junior Debt,
which also matures January 2008, totals approximately $31,276,000 and requires
monthly payments based upon monthly excess cash flow for each property. Per the
Junior Debt Agreements, excess cash flow is defined as revenue generated from
the operation of a property less (1) operating expenses of the property, (2) the
debt service payment for the Senior Loan, (3) tax and insurance reserve deposit,
and (4) replacement reserve deposit. Pursuant to agreements signed for each of
the Venture's investment properties with the holder of the Senior Loans, the
properties' excess monthly cash flows are first to be used to fund repair
reserves. As of December 31, 2000, these reserves are fully funded and the
excess monthly cash flow is now used as payment toward the Junior Debt. The
Venture anticipates that cash flow is sufficient to meet the operating needs of
the Venture as well as the requirements of the Senior Debt with any excess cash
flow being utilized to meet the requirements of the Junior Debt. The Assignment
Note and Long-Term Arrangement Fee Notes totaling approximately $42,060,000 are
non-interest bearing and are subordinate to the Senior and Junior Debt.
AIMCO LP, which owns the Managing General Partner and which is a controlled
affiliate of AIMCO, purchased (i) the Junior Debt on November 19, 1999, (ii) a
significant interest in the residual value of the properties on November 16,
1999 and (iii) economic and voting rights in a 0.61% interest in Partners
Liquidating Trust in September 2000. These transactions occurred between AIMCO
LP and unrelated third parties and thus had no affect on the combined financial
statements of the Venture. In connection with AIMCO LP's purchase of the Junior
Debt, (i) the seller, which owned the senior loans on the properties until
October 1998, acknowledged its prior consent to approximately $1,749,000 of
capital expenditures made on the properties in addition to those funded pursuant
to the capital expenditure reserves for the senior and junior loans, which
capital expenditures were funded out of cash flow that would otherwise have been
used to pay debt services on the Junior Debt, and (ii) certain convenience as to
the timeliness and completion of certain scheduled deferred maintenance items
were waived. In addition, AIMCO LP, the Venture, and the servicer of the senior
loans encumbering the properties (the "Servicer") agreed to a procedure to
assess whether or not capital expenditures, in addition to permitted capital
expenditures of $300 per unit per year, are needed at each property and the
methodology for funding any such capital expenditures. Capital expenditures that
are identified pursuant to these procedures were funded out of cash flow from
the properties that otherwise would be used to service the Junior Debt on the
properties.
The effect of these additional capital expenditures, and the funding that has
occurred has significantly increased the period of time that it will take to
amortize the junior loans, caused the junior loans to negatively amortize and
resulted in an increase in the amount of balloon payments due on the junior
loans at the end of the term. If the properties cannot be refinanced or sold at
or before the end of such term for a sufficient amount, the Venture will risk
losing such properties through foreclosure. There can be no assurance of the
effect that such additional capital expenditures, and the funding therefore,
will have on the operations of the properties, or whether the properties will be
maintained in the future in an acceptable or marketable state of repair.
There were no cash distributions to the partners of either of the Partnerships
for the years ended December 31, 2000, 1999, and 1998. In accordance with the
respective Agreements of Limited Partnership, there are no material restrictions
on the Partnerships' ability to make cash distributions; however, 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, the timing of debt maturities, refinancings and/or property sales. The
Partnerships' distribution policies are reviewed on an annual basis. There can
be no assurance that the Partnerships will generate sufficient funds from
operations, after required capital expenditures and the order of distributions
as stipulated by the Venture's Plan of Reorganization, to permit any
distributions to their partners in 2001 or subsequent periods.
As a result of tender offers, AIMCO and its affiliates currently own 39.75 units
of limited partnership interest in Portfolio I representing 6.17% of the
outstanding limited partnership interests, along with the 2% general partner
interest for a combined ownership in Portfolio I of 8.17%. AIMCO and its
affiliates currently own 31 units of limited partnership interest in Portfolio
II representing 11.61% of the outstanding limited partnership interests, along
with the 2% general partner interest for a combined ownership in Portfolio II of
13.61%. The Venture is owned 70.69% by Portfolio I and 29.31% by Portfolio II
which results in AIMCO and its affiliates currently owning 9.18% of the Venture.
It is possible that AIMCO or its affiliates will make one or more additional
offers to acquire additional limited partnership interests in the Partnerships
for cash or in exchange for units in the operating partnership of AIMCO. Under
the Partnership Agreements, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters, which would
include without limitation, voting on certain amendments to the Partnership
Agreements and voting to remove the Managing General Partner. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the Managing General Partner because of its
affiliation with the Managing General Partner.
Item 7a. Market Risk Factors
The Venture is exposed to market risks from adverse changes in interest rates.
In this regard, changes in U.S. interest rates affect the interest earned on the
Venture's cash and cash equivalents as well as interest paid on its
indebtedness. As a policy, the Venture does not engage in speculative or
leveraged transactions, nor does it hold or issue financial instruments for
trading purposes. The Venture is exposed to changes in interest rates primarily
as a result of its borrowing activities used to maintain liquidity and fund
business operations. To mitigate the impact of fluctuations in U.S. interest
rates, the Venture maintains its debt as fixed rate in nature by borrowing on a
long-term basis. Based on interest rates at December 31, 2000, 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 December 31,
2000. The interest rates represent the weighted-average rates. The fair value of
the debt obligations approximated the recorded value as of December 31, 2000.
Long-term Debt
Principal Weighted-average
(in thousands) Interest Rate
2001 $ 1,436 8.50%
2002 1,565 8.50%
2003 1,705 8.50%
2004 1,832 8.50%
2005 2,022 8.50%
Thereafter 129,172 9.07%
$137,732
Item 8. Financial Statements and Supplementary Data
LIST OF COMBINED FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors
Combined Balance Sheets - Years ended December 31, 2000 and 1999
Combined Statements of Operations - Years ended December 31, 2000, 1999,
and 1998
Combined Statements of Changes in Partners' Deficit - Years ended December
31, 2000, 1999, and 1998
Combined Statements of Cash Flows - Years ended December 31, 2000, 1999,
and 1998
Notes to Combined Financial Statements
Report of Ernst & Young LLP, Independent Auditors
The Partners
VMS National Properties Joint Venture
We have audited the accompanying combined balance sheets of VMS National
Properties Joint Venture as of December 31, 2000 and 1999, and the related
combined statements of operations, changes in partners' deficit, and cash flows
for each of the three years in the period ended December 31, 2000. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by the Partnership's management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of VMS National
Properties Joint Venture at December 31, 2000 and 1999, and the combined results
of its operations and its cash flows for each of the three years in the period
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States.
/s/ERNST & YOUNG LLP
Greenville, South Carolina
February 22, 2001
VMS NATIONAL PROPERTIES JOINT VENTURE
COMBINED BALANCE SHEETS
(in thousands)
December 31, December 31,
2000 1999
Assets:
Cash and cash equivalents $ 2,153 $ 2,004
Receivables and deposits 1,743 1,863
Restricted escrows 4,279 2,581
Other assets 329 311
Investment properties:
Land 13,404 13,404
Buildings and related personal property 139,698 135,080
Less accumulated depreciation (92,727) (86,798)
60,375 61,686
$ 68,879 $ 68,445
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 1,245 $ 649
Tenant security deposits liabilities 1,111 1,075
Accrued property taxes 521 598
Other liabilities 958 1,726
Accrued interest 1,071 713
Mortgage notes payable, including $31,276 due to
an affiliate at 2000 and $30,101 at 1999 (Note E) 137,732 137,811
Notes payable 42,060 41,657
Deferred gain on extinguishment of debt 42,225 42,225
Partners' Deficit (158,044) (158,009)
$ 68,879 $ 68,445
See Accompanying Notes to Combined Financial Statements
VMS NATIONAL PROPERTIES JOINT VENTURE
COMBINED STATEMENTS OF OPERATIONS
(in thousands, except per interest data)
For The Years Ended December 31,
2000 1999 1998
Revenues:
Rental income $29,566 $27,503 $26,511
Other income 1,449 1,155 1,166
Casualty gain -- -- 279
Total revenues 31,015 28,658 27,956
Expenses:
Operating 8,567 8,428 8,832
Property management fees 1,238 1,160 1,122
General and administrative 643 636 785
Depreciation 5,929 6,000 5,696
Interest 12,989 17,029 16,600
Property taxes 1,689 1,807 1,691
Loss on disposal of property -- -- 188
Total expenses 31,055 35,060 34,914
Net loss $ (40) $(6,402) $(6,958)
Net loss allocated to general partners (2%) $ (1) $ (128) $ (139)
Net loss allocated to limited partners (98%) (39) (6,274) (6,819)
$ (40) $(6,402) $(6,958)
Net loss per limited partnership interest:
Portfolio I (644 interests issued and
outstanding) $ (43) $(6,842) $(7,483)
Portfolio II (267 interests issued and
outstanding) $ (45) $(6,992) $(7,493)
See Accompanying Notes to Combined Financial Statements
VMS NATIONAL PROPERTIES JOINT VENTURE
COMBINED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(in thousands)
VMS National Residential Portfolio I
Limited Partners
General Accumulated Subscription
Partner Deficit Notes Total Total
Partners' deficit at December 31, 1997 $(3,347) $(97,932) $ (511) $(98,443) $(101,790)
Collections of subscription notes -- -- 5 5 5
Net loss for the year ended
December 31, 1998 (98) (4,819) -- (4,819) (4,917)
Partner's deficit at December 31, 1998 (3,445) (102,751) (506) (103,257) (106,702)
Net loss for the year ended
December 31, 1999 (90) (4,406) -- (4,406) (4,496)
Partners' deficit at December 31, 1999 (3,535) (107,157) (506) (107,663) (111,198)
Collections of subscription notes -- -- 4 4 4
Net loss for the year ended
December 31, 2000 (1) (27) -- (27) (28)
Partners' deficit at December 31, 2000 $(3,536) $(107,184) $ (502) $(107,686) $(111,222)
VMS National Residential Portfolio II
Limited Partners
General Accumulated Subscription
Partner Deficit Notes Total Total
Partners' deficit at December 31, 1997 $(1,401) $ (41,134) $ (335) $ (41,469) $ (42,870)
Collections of subscription notes -- -- 6 6 6
Net loss for the year ended
December 31, 1998 (41) (2,000) -- (2,000) (2,041)
Partner's deficit at December 31, 1998 (1,442) (43,134) (329) (43,463) (44,905)
Net loss for the year ended
December 31, 1999 (38) (1,868) -- (1,868) (1,906)
Partners' deficit at December 31, 1999 (1,480) (45,002) (329) (45,331) (46,811)
Collections of subscription notes -- -- 1 1 1
Net loss for the year ended
December 31, 2000 -- (12) -- (12) (12)
Partners' deficit at December 31, 2000 $(1,480) $ (45,014) $ (328) $ (45,342) $ (46,822)
Combined partners' deficit at
December 31, 2000 $(5,016) $(152,198) $ (830) $(153,028) $(158,044)
See Accompanying Notes to Combined Financial Statements
VMS NATIONAL PROPERTIES JOINT VENTURE
COMBINED STATEMENTS OF CASH FLOWS
(in thousands)
For The Years Ended December 31,
2000 1999 1998
Cash flows from operating activities:
Net loss $ (40) $(6,402) $(6,958)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 5,929 6,000 5,696
Amortization of mortgage discounts 403 4,199 4,003
Loss on disposal of property -- -- 188
Casualty gain -- -- (279)
Change in accounts:
Receivables and deposits 120 300 (291)
Other assets (18) 107 60
Accounts payable 97 244 36
Tenant security deposit liabilities 36 (33) 3
Accrued interest 2,965 1,061 3,146
Accrued property taxes (77) (449) 442
Other liabilities (768) 1,233 (501)
Net cash provided by operating
activities 8,647 6,260 5,545
Cash flows from investing activities:
Property improvements and replacements (4,119) (1,857) (3,216)
Net insurance proceeds from casualty -- -- 378
Net (deposits to) withdrawals from restricted
escrows (1,698) 15 (2,510)
Net cash used in investing activities (5,817) (1,842) (5,348)
See Accompanying Notes to Combined Financial Statements
VMS NATIONAL PROPERTIES JOINT VENTURE
COMBINED STATEMENTS OF CASH FLOWS (continued)
(in thousands)
For The Years Ended December 31,
2000 1999 1998
Cash flows from financing activities:
Payments on mortgage notes payable $(2,686) $(3,345) $(1,787)
Payments received on subscription notes 5 -- 11
Net cash used in financing activities (2,681) (3,345) (1,776)
Net increase (decrease) in cash and cash
equivalents 149 1,073 (1,579)
Cash and cash equivalents at beginning of year 2,004 931 2,510
Cash and cash equivalents at end of year $ 2,153 $ 2,004 $ 931
Supplemental disclosure of cash flow information:
Cash paid for interest $ 9,622 $11,768 $ 9,461
Supplemental disclosure of non-cash information:
Accrued interest added to mortgage notes payable $ 2,607 $ 1,424 $ 2,070
Property improvements and replacements included
in accounts payable and other liabilities $ 499 $ -- $ --
See Accompanying Notes to Combined Financial Statements
VMS NATIONAL PROPERTIES JOINT VENTURE
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 2000
Note A - Organization and Significant Accounting Policies
Organization:
VMS National Properties Joint Venture (the "Venture") was formed as a general
partnership pursuant to the Uniform Partnership Act of the State of Illinois and
a joint venture agreement (the "Venture Agreement") dated September 27, 1984,
between VMS National Residential Portfolio I ("Portfolio I") and VMS National
Residential Portfolio II ("Portfolio II") (collectively, the "Partnerships").
Effective December 12, 1997, the managing general partner of each of the
Partnerships was transferred from VMS Realty Investment, Ltd. ("VMSRIL" or the
"Former Managing General Partner") (formerly VMS Realty Partners) to MAERIL,
Inc. ("MAERIL" or the "Managing General Partner"), a wholly-owned subsidiary of
MAE GP Corporation ("MAE GP") and an affiliate of Insignia Financial Group, Inc.
("Insignia"). Effective February 25, 1998, MAE GP was merged with Insignia
Properties Trust ("IPT"), which was an affiliate of Insignia. Effective October
1, 1998 and February 26, 1999, Insignia and IPT were respectively merged into
Apartment Investment and Management Company ("AIMCO"). Thus the Managing General
Partner is now a wholly-owned subsidiary of AIMCO. See "Note B - Transfer of
Control". The directors and officers of the Managing General Partner also serve
as executive officers of AIMCO. The Partnership Agreement provides that the
Venture is to terminate on December 8, 2044, unless terminated prior to such
date.
The Venture originally acquired 51 residential apartment properties located
throughout the United States. Of these 51 properties, four were foreclosed prior
to 1993. As more fully described in "Note C", the Venture filed for Chapter 11
bankruptcy protection on February 22, 1991. The Venture's Second Amended and
Restated Plan of Reorganization (the "Plan") became effective on September 30,
1993. Pursuant to the Plan, 19 of the Venture's properties were foreclosed in
1993, four properties were foreclosed in 1994, five properties were foreclosed
in 1995 and two properties were foreclosed in 1996. Also, the Venture sold two
of the residential properties during 1996. The Venture continues to own and
operate 15 of the residential apartment complexes it originally acquired. These
properties are located in or near major urban areas in the United States.
Pursuant to the terms of the Joint Venture Agreement for the Venture and the
respective Partnership Agreements for Portfolio I and Portfolio II, the Managing
General Partner will manage Portfolio I, Portfolio II, VMS National Properties
and each of the Venture's operating properties. The Limited Partners do not
participate in or control the management of their respective partnership, except
that certain events must be approved by the Limited Partners. These events
include: (1) voluntary dissolution of either Portfolio I or Portfolio II, and
(2) amending substantive provisions of either Partnership Agreement.
Basis of Accounting:
The accompanying financial statements represent the combined financial
statements of VMS National Residential Portfolio I ("Portfolio I"), VMS National
Residential Portfolio II ("Portfolio II"), and the Venture. Significant
interpartnership accounts and transactions have been eliminated from these
combined financial statements.
Allocation of Income, Loss, and Distributions:
The operating profits and losses of VMS National Properties Joint Venture are
allocated to Portfolio I and Portfolio II based on their respective ownership of
VMS National Properties Joint Venture which is 70.69% and 29.31%, respectively.
Portfolio I and Portfolio II then combine their respective share of the
operating profits and losses of VMS National Properties Joint Venture with their
respective operating profits and losses which is then allocated 98% to the
respective limited partners and 2% to the respective general partners of both
Portfolio I and Portfolio II.
Operating cash flow distributions for Portfolio I and Portfolio II will be made
at the discretion of the Managing General Partner subject to the order of
distribution indicated in the Plan and approved by the Bankruptcy Court. Such
distributions will be allocated first to the respective Limited Partners in an
amount equal to 12% per year (on a noncumulative basis) of their contributed
capital; then, to the general partners, a subordinated incentive fee equal to
10.45% of remaining operating cash flow; and finally, of the balance to be
distributed, 98% to the Limited Partners and 2% to the general partners.
Distributions of proceeds arising from the sale or refinancing of the Venture's
properties will be allocated to Portfolio I and Portfolio II in proportion to
their respective Venture interests subject to the order of distribution
indicated in the Plan and approved by Bankruptcy Court. Distributions by
Portfolio I and Portfolio II will then be allocated as follows: (1) first to the
Limited Partners in an amount equal to their aggregate capital contributions;
(2) then to the general partners in an amount equal to their aggregate capital
contributions; (3) then, among the Limited Partners, an amount equal to
$62,000,000 multiplied by the respective percentage interest of Portfolio I or
Portfolio II in the Venture; and (4) finally, of the balance, 76% to the Limited
Partners and 24% to the general partners.
In any event, there shall be allocated to the general partners not less than 1%
of profits or losses.
Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Fair Value of Financial Instruments:
Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures about
Fair Value of Financial Instruments", as amended by SFAS No. 119, "Disclosures
about Derivative Financial Instruments and Fair Value of Financial Instruments",
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate fair value. Fair value is defined in the SFAS as the amount at which
the instruments could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. The Venture believes that
the carrying amounts of its financial instruments (except for long term debt)
approximate their fair value due to the short term maturity of these
instruments. The fair value of the Venture's first mortgages, after discounting
the scheduled loan payments to maturity is approximately $113,108,000, 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, the Assignment
Note and the long term arrangement fee, 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.
Cash and Cash Equivalents:
Includes cash on hand and in banks and money market accounts. At certain times,
the amount of cash deposited at a bank may exceed the limit on insured deposits.
At December 31, 2000, cash balances included approximately $616,000 that are
maintained by an affiliated management company on behalf of affiliated entities
in cash concentration accounts. No balances were maintained by the affiliated
management company at December 31, 1999.
Tenant Security Deposits:
The Venture requires security deposits from lessees for the duration of the
lease and such deposits are included in receivables and deposits. The security
deposits are refunded when the tenant vacates, provided the tenant has not
damaged its space, and is current on its rental payments.
Investment Properties:
Investment properties consist of fifteen apartment complexes and are stated at
cost. Acquisition fees are capitalized as a cost of real estate. In accordance
with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," which requires impairment losses to be
recorded on long-lived assets used in operations when events and circumstances
indicate that the assets might be impaired and the undiscounted cash flows
estimated to be generated by those assets are less than the carrying amounts of
those assets. The impairment loss is measured by comparing the fair value of the
asset to its carrying amount. No adjustments for impairment of value were
recorded in the years ended December 31, 2000, 1999 or 1998.
Escrows:
In connection with the December 1997 refinancing of the Venture's 15 remaining
properties, a replacement escrow was required for each property. Each property
was required to deposit an initial lump sum amount plus make monthly deposits
over the term of the loan, which varies by property. These funds are to be used
to cover replacement costs. The balance of the replacement reserves at December
31, 2000 and 1999 is approximately $4,279,000 and $2,581,000, respectively,
including interest.
Depreciation:
Depreciation is computed by the straight-line method over estimated useful lives
ranging from 25 to 29 years for buildings and improvements and the 150% or 200%
declining balance method for five to fifteen years for personal property.
Effective January 1, 1999 the Venture changed its method of accounting to
capitalize the costs of exterior painting and major landscaping (see "Note L -
Change in Accounting Principle").
Leases:
The Venture generally leases apartment units for twelve-month terms or less. The
Venture recognizes income as earned on its leases. In addition, the Managing
General Partner's policy is to offer rental concessions during particularly slow
months or in response to heavy competition from other similar complexes in the
area. Concessions are charged against rental income as incurred.
Segment Reporting:
SFAS No. 131, Disclosure about Segments of an Enterprise and Related Information
established standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers. As defined
in SFAS No. 131, the Partnership has only one reportable segment. The Managing
General Partner believes that segment-based disclosures will not result in a
more meaningful presentation than the combined financial statements as currently
presented.
Advertising Costs:
The Venture expenses the cost of advertising as incurred. Advertising costs of
approximately $355,000, $355,000, and $335,000, are included in operating
expense for the years ended December 31, 2000, 1999, and 1998, respectively.
Deferred Gain on Extinguishment of Debt:
For the period February 22, 1991 to September 30, 1993 the Venture was under a
Plan of Reorganization Under the Bankruptcy Code ("the Plan") and had reflected
its operations under the financial reporting guidance prescribed by the AICPA
Statement of Position 90-7 "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code". Pursuant to the Plan the senior and junior loans
were modified effective September 30, 1993. The face value of the loans were
recorded at the Agreed Valuation Amount as stipulated under the Plan and under
the terms of the restated notes, the holder of the loans may reinstate the full
claim which was in place at the petition filing date upon the default of any
note. Under SFAS 5 "Accounting for Contingencies" the difference between the
Agreed Valuation Amount and the face value of the junior loans was recorded as a
deferred gain.
Income Taxes:
Taxable income or loss of the Venture is reported in the income tax returns of
its partners. Accordingly, no provision for income taxes is made in the
financial statements of the Venture.
Note B - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998, and
February 26, 1999, Insignia and IPT merged into AIMCO, a publicly traded real
estate investment trust, with AIMCO being the surviving corporation (the
"Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in the
Managing General Partner. The Managing General Partner does not believe that
this transaction has had or will have a material effect on the affairs and
operations of the Venture.
Note C - Petition for Relief under Chapter 11 and Plan of Reorganization
On February 22, 1991, the Venture filed for Chapter 11 bankruptcy protection in
the United States Bankruptcy court in the Central District of California. The
initial filing included only the residential apartment complexes directly owned
by the Venture (entities included in the filing herein after referred to
collectively as the "Debtor") and excluded the 10 Subpartnerships consisting of
10 residential apartment complexes encumbered by financing insured or held by
the Department of Housing and Urban Development ("HUD"), and the investing
limited partnerships Portfolio I and Portfolio II. Due to the partnership
agreements existing between the Venture and the Partnerships, which provide the
Venture with exclusive rights to the limited partner investor contributions, the
Venture's initial filing was amended to reflect the Venture's right to receive
any excess limited partner investor contributions.
The Venture's Plan was confirmed by the Bankruptcy Court in March 1993 and
became effective on September 30, 1993 (the "Effective Date"). During 1997, the
Plan was modified in order to allow the Venture to refinance the debt
encumbering its properties (see "Note D"). The bankruptcy plan was closed by the
bankruptcy court on April 29, 1998.
The Primary aspects of the Venture's Plan of Reorganization included the
following:
(a) The Venture retained 17 properties from the existing portfolio (the
"Retained Properties"), and abandoned title of the remaining properties (the
"Non-retained Properties") to the Federal Deposit Insurance Corporation (the
"FDIC"). The Retained Properties consisted of one HUD property and sixteen
non-HUD properties. Two of the seventeen Retained Properties were sold during
1996. All of the Non-retained Properties were foreclosed upon as of December 31,
1996. Note C - Petition for Relief under Chapter 11 and Plan of Reorganization
(continued)
(b) The Venture restructured the existing senior-lien debt obligations on the
retained properties (except for one of the Retained Properties which had a first
mortgage lien insured by HUD and two of the Retained Properties which had senior
liens formerly payable to the FDIC, as successor to Beverly Hills Mortgage
Corporation ("BH")) to provide for an interest rate of 8.75% per annum effective
as of the first day of the month of the Effective Date with payments based on a
30 year amortization commencing on the first monthly payment due thereafter with
a maturity of January 15, 2000.
The senior lien collateralized by HUD on one of the retained properties was not
modified, and the senior liens formerly held by the FDIC were modified to accrue
at 9% per annum effective as of the first day of the month of the Effective Date
with monthly payments of interest only made at 7% per annum commencing with the
first monthly payments due thereafter on the FDIC value, as defined in "c"
below.
All of the senior-lien debt was refinanced on December 29, 1997 (see "Note D").
(c) As it pertained to the existing BH junior mortgages on the retained
properties, the FDIC reduced its claim on two of the properties to $300,000 per
property evidenced by a non-interest bearing note scheduled to mature January
15, 2000, and left in place liens for the full amount of its claims at the
petition date for all other retained properties. Interest on the former FDIC
loans for these retained properties accrued at 10% per annum on the FDIC value
(total property value per the FDIC's June 1992 valuations less the properties'
senior lien indebtedness) commencing as of the first day of the month of the
Effective Date and monthly payments of interest only at 7% per annum on the FDIC
value will commence with the first monthly payment due thereafter. The Retained
Property governed by a HUD Regulatory Agreement, made payments of interest only
following the approval by HUD of the Surplus Cash calculation. On October 28,
1995, the FDIC sold all of the debt it held related to the Retained Properties
to BlackRock Capital Finance, L.P. The debt amounts and terms were not modified.
On December 29, 1997, all of the junior mortgages were refinanced (see "Note
D").
(d) The Venture distributed the following amounts in conjunction with the terms
of the Plan: (1) approximately $5,980,000 to satisfy unsecured prepetition
creditor claims of the nonaffiliated note payable to Security Pacific National
Bank, trade creditors, and property taxes on the retained properties; (2)
approximately $1,056,000 to provide for allowed and unclassified administrative
claims; and (3) approximately $5,960,000 to make capital improvements at the
retained properties. This capital improvement reserve was exhausted during 1995.
(e) The VMS/Stout Joint Venture (the "VMS/Stout Venture") was formed pursuant to
an agreement dated August 18, 1984, which was amended and restated on October 4,
1984. VMS Realty Partners has a 50% interest and affiliates of the Seller (as
defined below) have a 50% interest in the VMS/Stout Venture. The VMS/Stout
Venture, the J.D. Stout Company ("Stout") and certain affiliates of Stout
entered into a contract of sale dated August 18, 1984, which was amended on
October 4, 1984. The contract provided for the sale by Stout and other owners
(collectively the "Seller") of the 51 residential apartment complexes to the
VMS/Stout Venture. The VMS/Stout Venture assigned its interest as purchaser to
the Venture. During 1987, Stout assigned its interest in the VMS/Stout Joint
Venture to ContiTrade Service Corporation ("ContiTrade"). On November 17, 1993,
VMS Realty Partners assigned its interest in the VMS/Stout Joint Venture to the
Partners Liquidating Trust (see "Note F"). The VMS/Stout Joint Venture was
granted an allowed claim in the amount of $49,535,000 for the Assignment and
Long-Term Loan Arrangement Notes payable to them by the Venture. Payments
totaling $3,475,000 in conjunction with this allowed claim were made to the
nonaffiliated members of the VMS/Stout Joint Venture on October 7, 1993. The
Venture also executed a $4,000,000 promissory note dated September 1, 1993, to
ContiTrade (the "ContiTrade Note") in connection with these allowed note claims.
The ContiTrade Note represented a prioritization of payments to ContiTrade of
the first $4,000,000 in repayments made under the existing Assignment and
Long-Term Loan Arrangement Notes payable to the VMS/Stout Joint Venture, and did
not represent an additional $4,000,000 claim payable to ContiTrade. In addition
to prioritizing ContiTrade's receipt of the first $4,000,000 of repayments on
the old notes, the ContiTrade Note provided for 5% non-compounding interest on
the outstanding principal balance calculated daily on the basis of a 360 day
year. The ContiTrade Note was secured by a Deed of Trust, Assignment of Rents
and Security Agreement on each of the Venture's retained properties, and
provided ContiTrade with other approval rights as to the ongoing operations of
the Venture's retained properties. The ContiTrade Note, which was scheduled to
mature January 15, 2000, was repaid on December 29, 1997 (see "Note D").
(f) The Venture entered into a Revised Restructured Amended and Restated Asset
Management Agreement (the "Revised Asset Management Agreement") with Insignia.
Effective October 1, 1993, Insignia took over the asset management of the
Venture's retained properties and partnership functions for the Venture. The
Revised Asset Management Agreement provided for an annual compensation of
$500,000 to be paid to Insignia in equal monthly installments. In addition,
Insignia received reimbursement for all accountable expenses incurred in
connection with their services up to $200,000 per calendar year. These amounts
are to be paid from the available operating cash flow of the Venture's Retained
Properties after the payment of operating expenses and priority reserve funding
for insurance, real estate and personal property taxes and senior and junior
mortgage payments. If insufficient operating cash flow exists after the funding
of these items, the balance of asset management fees and reimbursements may be
paid from available partnership cash sources. Additionally, the asset management
fee payable will be reduced proportionately for each of the Venture's Retained
Properties which are sold or otherwise disposed of from time to time.
Accordingly, the fee was reduced upon the disposition of Bellevue and Carlisle
Square in 1996. Effective January 1, 1998, in relation to the refinancing of the
senior-lien debt on December 29, 1997 (see "Note D"), the Venture and Managing
General Partner agreed to amend the Asset Management Agreement to reduce the
annual asset management fee payable to $300,000 per year and to reduce the
annual reimbursement for accountable expenses to $100,000.
Note D - Extraordinary Gain On Extinguishment Of Debt
Pursuant to the Plan of Reorganization (see "Note C"), the mortgages formerly
held by the FDIC were modified effective September 30, 1993. The face value of
the notes were restated to agreed valuation amounts. Under the terms of the
modification, the lender may reinstate the full claim upon the default of any
note. As a result, the Venture deferred recognition of a gain of $54,053,000,
which was the difference between the note face amounts and the agreed valuation
amounts of the modified debt.
On December 29, 1997, the Venture refinanced the mortgages encumbering all of
its remaining 15 properties. The refinancing resulted in each property being
encumbered by new senior and junior loans. The senior loans each have an
interest rate of 8.5% per annum and require monthly payments of principal and
interest. The junior loans each have an interest rate of 10.84% per annum and
require monthly payments based on excess monthly cash flow for each property.
Per the junior loan agreements, excess monthly cash flow is defined as revenue
generated from operation of a property less (1) operating expenses of the
property, (2) the debt service payment for the senior loans, (3) the tax and
insurance reserve deposit and (4) replacement reserve deposit. Pursuant to
agreements signed for each of the Venture's investment properties with the
holder of the Senior Loans, the properties' excess monthly cash flows are first
to be used to fund repair reserves. Once that reserve is fully funded, the
excess monthly cash flow will be used as payment towards the junior loans. As of
December 31, 2000, these reserves were fully funded and the excess monthly cash
flow is now used as payment toward the junior loans. All of the loans mature on
January 1, 2008, and the senior loans include prepayment penalties if paid prior
to January 1, 2007. The senior loans retained similar terms regarding note face
amounts and agreed valuation amounts. These new loans were recorded at the
agreed valuation amount of $110,000,000, which was less than the $152,225,000
face amount of the senior loans. If the Venture defaults on the new mortgage
notes payable or is unable to pay the outstanding agreed valuation amounts upon
maturity, then the note face amounts become due. The junior loans were recorded
at their face amount at the time of the refinancing and are being accounted for
under the terms of their note agreements. Accordingly, the Venture deferred
recognition of a gain of $42,225,000, which is the difference between the
refinanced note face amounts and the agreed valuation amounts. All the loans are
cross-collateralized, but they are not cross-defaulted. Therefore, a default by
one property under the terms of its loan agreement does not in and of itself
create a default under all of the senior and junior loan agreements. However, if
the proceeds upon the sale or refinancing of any property are insufficient to
fully repay the outstanding senior and junior loans related to that property,
any deficiency is to be satisfied from the sale or refinancing of the remaining
properties. In conjunction with the refinancing, the Venture paid the
outstanding principal and accrued interest on the $4,000,000 ContiTrade Note
(see "Note F").
Note E - Mortgage Notes Payable
Principal Principal Monthly Principal
Balance At Balance At Payment Balance
December 31, December 31, Including Due At
Property 2000 1999 Interest Maturity
(in thousands) (in thousands)
North Park Apartments
1st mortgage $ 6,135 $ 6,209 $ 51 $ 5,376
2nd mortgage 1,860 1,811 (A) (A)
Chapelle Le Grande
1st mortgage 3,148 3,184 26 2,759
2nd mortgage 995 949 (A) (A)
Terrace Gardens
1st mortgage 4,357 4,405 36 3,818
2nd mortgage 1,259 1,210 (A) (A)
Forest Ridge Apartments
1st mortgage 5,789 5,854 48 5,073
2nd mortgage 1,706 1,644 (A) (A)
Scotchollow
1st mortgage 28,590 28,913 236 25,054
2nd mortgage 8,415 8,058 (A) (A)
Pathfinders Village
1st mortgage 13,210 13,370 109 11,576
2nd mortgage 4,075 3,868 (A) (A)
Buena Vista Apartments
1st mortgage 4,861 4,920 40 4,260
2nd mortgage 1,360 1,299 (A) (A)
Mountain View Apartments
1st mortgage 7,023 7,108 58 6,154
2nd mortgage 1,894 1,961 (A) (A)
Crosswood Park
1st mortgage 5,463 5,530 45 4,788
2nd mortgage 1,343 1,309 (A) (A)
Casa de Monterey
1st mortgage 4,024 4,074 33 3,479
2nd mortgage 1,232 1,178 (A) (A)
The Bluffs
1st mortgage 3,654 3,695 30 3,202
2nd mortgage 1,097 1,044 (A) (A)
Watergate Apartments
1st mortgage 2,844 2,878 23 2,492
2nd mortgage 827 799 (A) (A)
Shadowood Apartments
1st mortgage 2,209 2,236 18 1,936
2nd mortgage 608 586 (A) (A)
Vista Village Apartments
1st mortgage 3,259 3,299 27 2,856
2nd mortgage 988 938 (A) (A)
Towers of Westchester Park
1st mortgage 11,890 12,035 98 10,420
2nd mortgage 3,617 3,447 (A) (A)
Totals $137,732 $137,811 $878 $93,243
(A) Payments are based on excess monthly cash flow, as defined (see "Note D -
Extraordinary Gain on Extinguishment of Debt"), with any unpaid balance
due at maturity.
Interest rates are 8.50% and 10.84% for all first and second mortgages,
respectively. All notes mature January 1, 2008.
AIMCO Properties, LP ("AIMCO LP"), which owns the Managing General Partner and
which is a controlled affiliate of AIMCO, purchased (i) the junior loans on
November 19, 1999, and (ii) a significant interest in the residual value of the
properties on November 16, 1999. These transactions occurred between AIMCO LP
and an unrelated third party and thus had no effect on the combined financial
statements of the Venture. Residual Value is defined as the amount remaining
from a sale of the Partnerships' investment properties or refinancing of the
mortgages encumbering such investment properties after repayment of: (i) senior
loans, plus accrued interest; (ii) junior loans, plus accrued interest; (iii)
Assignment Note (as defined), plus accrued interest; and (iv) $13,000,000
advance to the Partnerships. Fifty percent of the Residual Value is to be paid
to AIMCO LP with the remainder being used to first repay other liabilities of
the Partnerships and second, returned to the investors. Based upon information
currently available to the Managing General Partner, it is anticipated that
there will be no residual proceeds upon a sale or refinancing of the investment
properties; therefore, no liability has been recognized in the combined balance
sheets. However, future circumstances may require such a liability to be
recognized.
Scheduled principal payments on mortgage loans payable subsequent to December
31, 2000 are as follows (in thousands):
2001 $ 1,436
2002 1,565
2003 1,705
2004 1,832
2005 2,022
Thereafter 129,172
$137,732
As principal payments for the junior loans are based upon monthly cash flow, all
principal is assumed to be repaid at maturity.
Note F - Notes Payable
Assignment Note:
The Venture executed a $29,000,000 purchase money subordinated note (the
"Assignment Note") payable to the VMS/Stout Venture in exchange for the
assignment by the VMS/Stout Venture of its interest in the contract of sale to
the Venture. The Assignment Note is collateralized by the pledge from Portfolio
I and Portfolio II of their respective interests in the Venture.
On November 17, 1993, VMS Realty Partners assigned its 50% interest in the
VMS/Stout Venture to the Partners Liquidating Trust which was established for
the benefit of the former creditors of VMS Realty Partners and its affiliates.
The stated rate of interest on the Assignment Note (prior to modification by the
Plan) was 12% per annum compounded semi-annually with monthly payments of
interest only at a rate of 6%. Monthly payments on this note were discontinued
in May 1990, and the accrual of interest was discontinued after the February 22,
1991 petition filing date. Additionally, effective April 10, 1991, VMS Realty
Partners waived its right to collect interest on its portion of the Assignment
Note.
Pursuant to the Plan, the allowed claim for the Assignment Note and related
interest was $46,285,000; $3,475,000 of this amount was paid in October 1993, in
accordance with the terms of the Plan. The Venture also executed a $4,000,000
promissory note payable dated September 1, 1993 to ContiTrade Services
Corporation ("ContiTrade Note") with interest at 5% per annum. This note
represented a prioritization of payment to ContiTrade and did not represent the
assumption of any additional debt. The ContiTrade Note was to mature on January
15, 2000, and was collateralized by a Deed of Trust, Assignment of Rents and
Security Agreement on each of the Venture's retained complexes. This note was
repaid with the refinancing on December 29, 1998 (see "Note D").
The remaining $38,810,000 of the Assignment Note is non-interest bearing and is
payable only after payment of debt of higher priority, including the senior and
junior mortgage notes payable. Pursuant to SOP 90-7, the Assignment Note, the
Long-Term Loan Arrangement Fee Note (as defined below) and related accrued
interest were adjusted to the present value of amounts to be paid using an
estimated current interest rate of 11.5%. At December 31, 2000, the carrying
amount of the Assignment Note is $38,810,000. Interest expense is being
recognized through the amortization of the discount which totaled approximately
$403,000 and $4,199,000, and $4,003,000 in 2000, 1999, and 1998, respectively.
The discount became fully amortized in January 2000.
Long-Term Loan Arrangement Fee Note:
The Venture executed a $3,000,000 unsecured, nonrecourse promissory note, the
"Long-Term Loan Arrangement Fee Note" payable to the VMS/Stout Venture as
consideration for arranging long-term financing.
The stated rate of interest on this note prior to modification by the Plan was
10% per annum, payable on a monthly basis. Monthly interest payments on this
Note were discontinued in May 1990. Additionally, the accrual of interest on
this Note was discontinued after the February 22, 1991 petition filing date.
Pursuant to the Plan, the entire $3,250,000 balance, which included $250,000 in
unpaid accrued interest that was rolled into principal, was granted as an
allowed claim. None of this balance bears interest, and the balance is payable
only after debt of a higher priority, including senior and junior mortgage
loans.
Note G - Transactions With Affiliated Parties
The Venture has no employees and is dependent on the Managing General Partner
and its affiliates for the management and administration of all Subpartnership
activities. The Revised Asset Management Agreement, which was executed in
conjunction with the Venture's Plan, provided for (i) certain payments to
affiliates for real estate advisory services and asset management of the
Venture's retained properties for an annual compensation of $500,000 and (ii)
reimbursement of certain expenses incurred by affiliates on behalf of the
Venture up to $200,000 per annum.
Effective January 1, 1998, in relation to the refinancing of the Senior Debt on
December 29, 1997, the Venture and Managing General Partner agreed to amend the
Asset Management Agreement to reduce the annual asset management fee payable to
$300,000 per year and to reduce the annual reimbursement for accountable
expenses to $100,000.
Asset management fees of approximately $300,000 were paid to an affiliate of the
Managing General Partner for each of the years ended December 31, 2000, 1999,
and 1998. These fees were included in operating expenses.
Affiliates of the Managing General Partner are entitled to receive a percentage
of the gross receipts from all of the Registrant's properties as compensation
for providing property management services. The Registrant paid to such
affiliates approximately $1,238,000, $1,160,000 and $1,122,000 for the years
ended December 31, 2000, 1999, and 1998.
Affiliates of the Managing General Partner received reimbursement of accountable
administrative expenses amounting to approximately $100,000 for each of the
years ended December 31, 2000, 1999, and 1998. These expenses are included in
general and administrative expenses. Included in investment properties and
operating expenses of the Venture are construction oversight reimbursements,
paid to an affiliate of the Managing General Partner, of approximately $125,000,
$16,000, and $54,000 for the years ended December 31, 2000, 1999, and 1998,
respectively.
An affiliate of the Managing General Partner received bookkeeping reimbursements
in the amount of approximately $131,000, $142,000 and $144,000 for the years
ended December 31, 2000, 1999, and 1998, respectively. These expenses are
included in general and administrative expenses.
In connection with the Venture's Plan, the court approved the payment of certain
fees and expense reimbursements due to the former managing general partner
relating to the prepetition period. An unpaid balance of approximately $397,000
in management fees owed to the former managing general partner was assigned to
MF VMS, L.L.C., the note holder for the senior and junior notes. This balance
was paid during 1998.
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 December 31, 2000, 1999, and 1998, the outstanding
balance of $79,000 is included in other liabilities.
During the year ended December 31, 2000, the Managing General Partner loaned the
Venture funds to cover operational expenses required at Buena Vista and Casa de
Monterey Apartments. These loans were made in accordance with the terms of the
Partnership Agreements. At December 31, 2000, the balance of the loans was
approximately $17,000, which is included in other liabilities. Interest is
charged at the prime rate plus 2% or the Managing General Partner's cost,
whichever is lower. Interest expense was approximately $2,000 for the year ended
December 31, 2000.
Certain affiliates of the former general partners and the VMS/Stout Venture may
be entitled to receive various fees upon disposition of the properties. These
fees will be paid from the disposition proceeds and are subordinated to the
distributions required by the Plan. There were no property dispositions for
which proceeds were received during the years ended December 31, 2000, 1999, and
1998.
AIMCO LP, which owns the Managing General Partner and which is a controlled
affiliate of AIMCO, purchased (i) the junior loans on November 19, 1999, and
(ii) a significant interest in the Residual Value (as defined in the agreement)
of the properties on November 16, 1999. These transactions occurred between
AIMCO LP and an unrelated third party and thus had no effect on the combined
financial statements of the Venture. Residual Value is defined as the amount
remaining from a sale of the Partnerships' investment properties or refinancing
of the mortgages encumbering such investment properties after repayment of: (i)
senior loans, plus accrued interest; (ii) junior loans, plus accrued interest;
(iii) Assignment Note, plus accrued interest; and (iv) $13,000,000 advance to
the Partnerships. Fifty percent of the Residual Value is to be paid to AIMCO LP
with the remainder being used to first repay other liabilities of the
Partnerships and second, returned to the investors. Based upon information
currently available to the Managing General Partner, it is anticipated that
there will be no residual proceeds upon a sale or refinancing of the investment
properties; therefore, no liability has been recognized in the combined balance
sheets. However, future circumstances may require such a liability to be
recognized.
As a result of tender offers, AIMCO and its affiliates currently own 39.75 units
of limited partnership interest in Portfolio I representing 6.17% of the
outstanding limited partnership interests, along with the 2% general partner
interest for a combined ownership in Portfolio I of 8.17%. AIMCO and its
affiliates currently own 31 units of limited partnership interest in Portfolio
II representing 11.61% of the outstanding limited partnership interests, along
with the 2% general partner interest for a combined ownership in Portfolio II of
13.61%. The Venture is owned 70.69% by Portfolio I and 29.31% by Portfolio II
which results in AIMCO and its affiliates currently owning 9.18% of the Venture.
It is possible that AIMCO or its affiliates will make one or more additional
offers to acquire additional limited partnership interests in the Partnerships
for cash or in exchange for units in the operating partnership of AIMCO. Under
the Partnership Agreements, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters, which would
include without limitation, voting on certain amendments to the Partnership
Agreement and voting to remove the Managing General Partner. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the Managing General Partner because of their
affiliation with the Managing General Partner.
Note H - Subscription Notes And Accrued Interest Receivable
Portfolio I and Portfolio II executed promissory notes requiring cash
contributions from the partners aggregating $136,800,000 to the capital of
Portfolios I and II for 644 and 267 units, respectively. Of this amount,
approximately $135,060,000 was contributed in cash through December 31, 2000,
and $910,000 was deemed uncollectible and written-off prior to December 31,
2000. The following table represents the remaining Limited Partners'
subscription notes principal balances and the related accrued interest
receivable at December 31, 2000 (in thousands):
Portfolio I Portfolio II
Subscription notes receivable $502 $328
Accrued interest receivable 63 67
Allowance for uncollectible interest
receivable (63) (67)
Total subscription notes and accrued
interest receivable $502 $328
All amounts outstanding at December 31, 2000, are considered past due and bear
interest at the default rate of 18%. No interest will be recognized until
collection is assured.
Note I - Investment Properties and Accumulated Depreciation
Initial Cost
(in thousands)
Buildings and Costs Capitalized Provision to
Related Personal Subsequent to Reduce to
Description Encumbrances Land Property Acquisition Fair Value
North Park Apartments $ 7,995 $ 557 $ 8,349 $ 1,688 $ --
Chapelle Le Grande 4,143 166 3,873 997 --
Terrace Garden 5,616 433 4,517 1,329 --
Forest Ridge Apartments 7,495 701 6,930 1,671 --
Scotchollow 37,005 3,510 19,344 5,990 --
Pathfinders Village 17,285 3,040 11,698 3,414 (1,250)
Buena Vista Apartments 6,221 893 4,538 629 --
Mountain View Apartments 8,917 1,289 8,490 1,263 --
Crosswood Park 6,806 611 8,597 2,109 (2,000)
Casa De Monterey 5,256 869 6,136 1,371 --
The Bluffs 4,751 193 3,667 627 --
Watergate Apartments 3,671 263 5,625 1,386 --
Shadowood Apartments 2,817 209 3,393 839 --
Vista Village Apartments 4,247 568 5,209 1,171 --
Towers Of Westchester Park 15,507 529 13,491 4,180 --
TOTAL $137,732 $13,831 $113,857 $28,664 $(3,250)
Gross Amount At Which Carried
At December 31, 2000
(in thousands)
Buildings Accum-
And Related ulated Year of Date of
Personal Deprec- Construc- Acquis- Depreciable
Description Land Property Total iation tion ition Life
Years
North Park Apartments $ 557 $ 10,037 $ 10,594 $ 6,949 1968 11/14/84 5-27.5
Chapelle Le Grand 166 4,870 5,036 3,188 1972 12/05/84 5-27.5
Terrace Gardens 433 5,846 6,279 3,816 1973 10/26/84 5-27.5
Forest Ridge Apartments 701 8,601 9,302 5,684 1974 10/26/84 5-27.5
Scotchollow 3,510 25,334 28,844 17,480 1973 10/26/84 5-27.5
Pathfinders Village 2,753 14,149 16,902 9,200 1971 10/26/84 5-27.5
Bunea Vista Apartments 893 5,167 6,060 3,633 1972 10/26/84 5-27.5
Mountain View Apartments 1,289 9,753 11,042 6,098 1978 10/26/84 5-29
Crosswood Park 471 8,846 9,317 5,629 1977 12/05/84 5-29
Casa De Monterey 869 7,507 8,376 5,032 1970 10/26/84 5-27.5
The Bluffs 193 4,294 4,487 2,961 1968 10/26/84 5-27.5
Watergate Apartments 263 7,011 7,274 4,673 1972 10/26/84 5-27.5
Shadowood Apartments 209 4,232 4,441 2,919 1974 11/14/84 5-27.5
Vista Village Apartments 568 6,380 6,948 4,190 1971 10/26/84 5-27.5
Towers Of Westchester 529 17,671 18,200 11,275 1971 10/26/84 5-27.5
Park
TOTAL $13,404 $139,698 $153,102 $ 92,727
The aggregate costs of the investment properties for Federal income tax purposes
at December 31, 2000 and 1999, is approximately $170,565,000 and $165,944,000,
respectively. The accumulated depreciation for Federal income tax purposes at
December 31, 2000 and 1999, is approximately $135,770,000 and $128,608,000,
respectively.
Reconciliation of Investment Properties and Accumulated Depreciation:
2000 1999 1998
Investment Properties
Balance at beginning of year $148,484 $146,627 $144,007
Property improvements
and replacements 4,618 1,857 3,216
Dispositions of property -- -- (596)
Balance at end of year $153,102 $148,484 $146,627
Accumulated Depreciation
Balance at beginning of year $ 86,798 $ 80,798 $ 75,411
Additions charged to expense 5,929 6,000 5,696
Dispositions of property -- -- (309)
Balance at end of year $ 92,727 $ 86,798 $ 80,798
Note J - Income Taxes
The following is a reconciliation of reported net loss per the financial
statements to the Federal taxable loss to partners (in thousands):
2000 1999 1998
Net loss as reported $ (40) $(6,402) $(6,958)
Depreciation differences (1,233) (749) (371)
Unearned income (577) 812 66
Casualty loss -- -- 161
Write-down of fixed assets -- -- 125
Other (80) 95 185
Federal taxable loss $(1,930) $(6,244) $(6,792)
The following is a reconciliation between the Venture's reported amounts and
Federal tax basis of net liabilities at December 31, 2000 and 1999 (in
thousands):
2000 1999
Net liabilities as reported $(158,044) $(158,009)
Land and buildings 17,460 17,460
Accumulated depreciation (43,043) (41,810)
Syndication costs 17,650 17,650
Deferred gain 42,225 42,225
Other deferred costs 9,601 9,601
Other (53,102) (52,445)
Notes payable 4,882 4,882
Subscription note receivable 1,837 1,842
Mortgage payable (47,727) (47,727)
Accrued interest 9,571 9,571
Net liabilities - Federal tax basis $(198,690) $(196,760)
Note K - Legal Proceedings
The Venture is unaware of any pending or outstanding litigation that is not of a
routine nature arising in the ordinary course of business.
Note L - Change in Accounting Principle
Effective January 1, 1999, the Venture changed its method of accounting to
capitalize the cost of exterior painting and major landscaping. The Partnership
believes that this accounting principle change is preferable because it provides
a better matching of expenses with the related benefit of the expenditures and
it is consistent with industry practice and the policies of the Managing General
Partner. The effect of the change in 1999 was to decrease the net loss by
approximately $66,000 ($71.00 per limited partnership interest for both
Portfolio I and II). The cumulative effect, had this change been applied to
prior periods, is not material. The accounting principle change will not have an
effect on cash flow, funds available for distribution or fees payable to the
Managing General Partner and affiliates.
Note M - Selected Quarterly Financial Data (Unaudited)
The following is a summary of the unaudited quarterly results of operations for
the Venture (in thousands, except per interest data):
1st 2nd 3rd 4th
2000 Quarter Quarter Quarter Quarter Total
Total revenues $ 7,461 $ 7,676 $ 7,889 $ 7,989 $31,015
Total expenses 7,958 7,664 7,734 7,699 31,055
Net (loss) income $ (497) $ 12 $ 155 $ 290 $ (40)
Net (loss) income per limited partnership
interest:
Portfolio I (644 interests issued and
outstanding) $ (535) $ 13 $ 168 $ 311 $ (43)
Portfolio II (267 interests issued
and outstanding) $ (536) $ 15 $ 165 $ 311 $ (45)
1st 2nd 3rd 4th
1999 Quarter Quarter Quarter Quarter Total
Total revenues $ 7,056 $ 7,119 $ 7,255 $ 7,228 $28,658
Total expenses 8,567 8,484 8,529 9,480 35,060
Net loss $(1,511) $(1,365) $(1,274) $(2,252) $(6,402)
Net loss per limited partnership interest:
Portfolio I (644 interests issued and
outstanding) $(1,625) $(1,469) $(1,371) $(2,377) $(6,842)
Portfolio II (267 interests issued
and outstanding) $(1,626) $(1,469) $(1,371) $(2,526) $(6,992)
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The Partnerships have no officers or directors. The Managing General Partner
manages substantially all of the affairs and has general responsibility in all
matters affecting the business of the Venture. Effective December 12, 1997, the
managing general partner of each of the Partnerships was transferred from VMS
Realty Investment, Ltd. ("VMSRIL") (formerly VMS Realty Partners) to MAERIL,
Inc. ("MAERIL" or the "Managing General Partner"), a wholly-owned subsidiary of
MAE GP Corporation ("MAE GP") and an affiliate of Insignia Financial Group, Inc.
("Insignia"). Effective February 25, 1998, MAE GP was merged with Insignia
Properties Trust ("IPT"), which is an affiliate of Insignia. Effective October
1, 1998 and February 26, 1999; Insignia and IPT were respectively merged into
Apartment Investment and Management Company ("AIMCO"). Thus, the Managing
General Partner is now a wholly-owned subsidiary of AIMCO.
The names of the directors and executive officers of the Managing General
Partner, their ages and the nature of all positions with the Managing General
Partner presently held by them are set forth below. There are no family
relationships between or among any officers or directors.
Name Age Position
Patrick J. Foye 43 Executive Vice President and Director
Martha L. Long 41 Senior Vice President and Controller
Patrick J. Foye has been Executive Vice President and Director of the Managing
General Partner since October 1, 1998. Mr. Foye has served as Executive Vice
President of AIMCO since May 1998. Prior to joining AIMCO, Mr. Foye was a
partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to
1998 and was Managing Partner of the firm's Brussels, Budapest and Moscow
offices from 1992 through 1994. Mr. Foye is also Deputy Chairman of the Long
Island Power Authority and serves as a member of the New York State
Privatization Council. He received a B.A. from Fordham College and a J.D. from
Fordham University Law School.
Martha L. Long has been Senior Vice President and Controller of the Managing
General Partner since October 1998 as a result of the acquisition of Insignia
Financial Group, Inc. As of February 2001, Ms. Long was also appointed head of
the service business for AIMCO. From June 1994 until January 1997, she was the
Controller for Insignia, and was promoted to Senior Vice President - Finance and
Controller in January 1997, retaining that title until October 1998. From 1988
to June 1994, Ms. Long was Senior Vice President and Controller for The First
Savings Bank, FSB in Greenville, South Carolina.
One or more of the above persons are also directors and/or officers of a general
partner (or general partner of a general partner) of limited partnerships which
either have a class of securities registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934, or are subject to the reporting requirements of
Section 15(d) of such Act. Further, one or more of the above persons are also
directors and/or officers of Apartment Investment and Management Company and the
general partner of AIMCO Properties, L.P., entities that have a class of
securities registered pursuant to Section 12(g) of the Securities Exchange Act
of 1934, or are subject to the reporting requirements of Section 15 (d) of such
Act.
The executive officers and director of the Managing General Partner fulfill the
obligations of the Audit Committee and oversee the Partnership's financial
reporting process on behalf of the Managing General Partner. Management has the
primary responsibility for the financial statements and the reporting process
including the systems of internal controls. In fulfilling its oversight
responsibilities, the executive officers and director of the Managing General
Partner reviewed the audited financial statements with management including a
discussion of the quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments, and the clarity of
disclosures in the financial statements.
The executive officers and director of the Managing General Partner reviewed
with the independent auditors, who are responsible for expressing an opinion on
the conformity of those audited financial statements with generally accepted
accounting principles, their judgments as to the quality, not just the
acceptability, of the Partnership's accounting principles and such other matters
as are required to be discussed with the Audit Committee or its equivalent under
generally accepted auditing standards. In addition, the Partnership has
discussed with the independent auditors the auditors' independence from
management and the Partnership including the matters in the written disclosures
required by the Independence Standards Board and considered the compatibility of
non-audit services with the auditors' independence.
The executive officers and director of the Managing General Partner discussed
with the Partnership's independent auditors the overall scope and plans for
their audit. In reliance on the reviews and discussions referred to above, the
executive officers and director of the Managing General Partner has approved the
inclusion of the audited financial statements in the Form 10-K for the year
ended December 31, 2000 for filing with the Securities and Exchange Commission.
The Managing General Partner has reappointed Ernst & Young LLP as independent
auditors to audit the financial statements of the Partnership for the current
fiscal year. Fees for the last fiscal year were annual audit services of
approximately $109,000 and non-audit services (principally tax-related) of
approximately $58,000.
Item 11. Executive Compensation
No compensation or remuneration was paid by the Venture to any officer or
director of the Managing General Partner. However, reimbursements and other
payments have been made to the Venture's current and former managing general
partners and their affiliates, as described in "Item 13. Certain Relationships
and Related Transactions".
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security ownership of certain beneficial owners.
Except as noted below, no persons or entity owns of record or is known by the
Venture to own beneficially more than 5% of the outstanding Interests of either
of the Partnerships as of December 31, 2000.
Entity Number of Units Percentage
National Residential Portfolio I
AIMCO Properties LP 39.75 6.17%
(an affiliate of AIMCO)
National Residential Portfolio II
AIMCO Properties LP 31.00 11.61%
(an affiliate of AIMCO)
AIMCO Properties LP is indirectly ultimately controlled by AIMCO. Its business
address is 2000 South Colorado Boulevard, Denver, Colorado.
(b) Security ownership of management.
No officers or directors of MAERIL or of Prudential-Bache Properties, Inc., the
general partners of the Partnerships, own any Limited Partnership Interests in
the Partnerships.
No general partners, officers or directors of the general partners of the
Venture possess the right to acquire a beneficial ownership of Interests of
either of the Partnerships.
(c) Change in control
Pursuant to a series of transactions which closed on October 1, 1998, and
February 26, 1999, Insignia Financial Group, Inc. ("Insignia") and Insignia
Properties Trust merged into Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust, with AIMCO being the
surviving corporation (the "Insignia Merger"). As a result, AIMCO acquired 100%
ownership interest in the Managing General Partner. The Managing General Partner
does not believe that this transaction has had or will have a material effect on
the affairs and operations of the Venture.
Item 13. Certain Relationships and Related Transactions
The Venture has no employees and is dependent on the Managing General Partner
and its affiliates for the management and administration of all Subpartnership
activities. The Revised Asset Management Agreement, which was executed in
conjunction with the Venture's Plan, provided for (i) certain payments to
affiliates for real estate advisory services and asset management of the
Venture's retained properties for an annual compensation of $500,000 and (ii)
reimbursement of certain expenses incurred by affiliates on behalf of the
Venture up to $200,000 per annum.
Effective January 1, 1998, in relation to the refinancing of the Senior Debt on
December 29, 1997, the Venture and Managing General Partner agreed to amend the
Asset Management Agreement to reduce the annual asset management fee payable to
$300,000 per year and to reduce the annual reimbursement for accountable
expenses to $100,000.
Asset management fees of approximately $300,000 were paid to an affiliate of the
Managing General Partner for each of the years ended December 31, 2000, 1999,
and 1998. These fees are included in operating expenses.
Affiliates of the Managing General Partner are entitled to receive a percentage
of the gross receipts from all of the Registrant's properties as compensation
for providing property management services. The Registrant paid to such
affiliates approximately $1,238,000, $1,160,000 and $1,122,000 for the years
ended December 31, 2000, 1999, and 1998, respectively.
Affiliates of the Managing General Partner received reimbursement of accountable
administrative expenses amounting to approximately $100,000 for each of the
years ended December 31, 2000, 1999, and 1998. These expenses are included in
general and administrative expenses. Included in investment properties and
operating expenses of the Venture are construction oversight reimbursements,
paid to an affiliate of the Managing General Partner, of approximately $125,000,
$16,000, and $54,000 for the years ended December 31, 2000, 1999, and 1998,
respectively.
An affiliate of the Managing General Partner received bookkeeping reimbursements
in the amount of approximately $131,000, $142,000 and $144,000 for the years
ended December 31, 2000, 1999, and 1998, respectively. These expenses are
included in general and administrative expenses.
In connection with the Venture's Plan, the court approved the payment of certain
fees and expense reimbursements due to the former managing general partner
relating to the prepetition period. An unpaid balance of approximately $397,000
in management fees owed to the former managing general partner was assigned to
MF VMS, L.L.C., the note holder for the senior and junior notes. This balance
was paid during 1998.
During the year ended December 31, 2000, the Managing General Partner loaned the
Venture funds to cover operational expenses required at Buena Vista and Casa de
Monterey Apartments. These loans were made in accordance with the terms of the
Partnership Agreements. At December 31, 2000, the balance of the loans were
approximately $17,000, which is included in other liabilities. Interest is
charged at the prime rate plus 2% or the Managing General Partner's cost,
whichever is lower. Interest expense was approximately $2,000 for the year ended
December 31, 2000 and is included in interest expense.
Certain affiliates of the former general partners and the VMS/Stout Venture may
be entitled to receive various fees upon disposition of the properties. These
fees will be paid from the disposition proceeds and are subordinated to the
distributions required by the Plan. There were no property dispositions for
which proceeds were received during the years ended December 31, 2000, 1999, and
1998.
AIMCO LP, which owns the Managing General Partner and which is a controlled
affiliate of AIMCO, purchased (i) the junior loans on November 19, 1999, and
(ii) a significant interest in the Residual Value (as defined in the agreement)
of the properties on November 16, 1999. These transactions occurred between
AIMCO LP and an unrelated third party and thus had no effect on the combined
financial statements of the Venture. Residual Value is defined as the amount
remaining from a sale of the Partnerships' investment properties or refinancing
of the mortgages encumbering such investment properties after repayment of: (i)
senior loans, plus accrued interest; (ii) junior loans, plus accrued interest;
(iii) Assignment Note, plus accrued interest; and (iv) $13,000,000 advance to
the Partnerships. Fifty percent of the Residual Value is to be paid to AIMCO LP
with the remainder being used to first repay other liabilities of the
Partnerships and second, returned to the investors. Based upon information
currently available to the Managing General Partner, it is anticipated that
there will be no residual proceeds upon a sale or refinancing of the investment
properties; therefore, no liability has been recognized in the balance sheet.
However, future circumstances may require such a liability to be recognized.
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 December 31, 2000, 1999, and 1998, the outstanding
balance of $79,000 is included in other liabilities.
As a result of tender offers, AIMCO and its affiliates currently own 39.75 units
of limited partnership interest in Portfolio I representing 6.17% of the
outstanding limited partnership interests, along with the 2% general partner
interest for a combined ownership in Portfolio I of 8.17%. AIMCO and its
affiliates currently own 31 units of limited partnership interest in Portfolio
II representing 11.61% of the outstanding limited partnership interests, along
with the 2% general partner interest for a combined ownership in Portfolio II of
13.61%. The Venture is owned 70.69% by Portfolio I and 29.31% by Portfolio II
which results in AIMCO and its affiliates currently owning 9.18% of the Venture.
It is possible that AIMCO or its affiliates will make one or more additional
offers to acquire additional limited partnership interests in the Partnerships
for cash or in exchange for units in the operating partnership of AIMCO. Under
the Partnership Agreements, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters, which would
include without limitation, voting on certain amendments to the Partnership
Agreement and voting to remove the Managing General Partner. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the Managing General Partner because of their
affiliation with the Managing General Partner.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following combined financial statements of the Registrant are included
in Item 8:
Combined Balance Sheets at December 31, 2000 and 1999.
Combined Statements of Operations for the years ended December 31, 2000,
1999 and 1998.
Combined Statements of Changes in Partners' Deficit for the years ended
December 31, 2000, 1999 and 1998.
Combined Statements of Cash Flows for the years ended December 31, 2000,
1999 and 1998.
Notes to Combined Financial Statements
Schedules are omitted for the reason that they are inapplicable or
equivalent information has been included elsewhere herein.
The following items are incorporated:
Part V - Amended Restated Certificate and Agreement of:
Item 1(b)(i) Limited Partnership of VMS National Residential Portfolio I.
Item 1(b)(ii) Limited Partnership of VMS National Residential Portfolio II.
Item 1(b)(iii) Joint Venture Agreement between VMS National Residential
Portfolio I and VMS National Residential Portfolio II.
(b) Reports on Form 8-K:
None filed during the quarter ended December 31, 2000.
(c) 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
(Registrant)
VMS National Residential Portfolio I
By: MAERIL, Inc.
Managing General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President and
Controller
VMS National Residential Portfolio II
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President and
Controller
Date:
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/Patrick J. Foye Date:
Patrick J. Foye
Executive Vice President
and Director
/s/Martha L. Long Date:
Martha L. Long
Senior Vice President
and Controller
Exhibit 11
VMS NATIONAL PROPERTIES JOINT VENTURE
CALCULATION OF NET LOSS PER INVESTOR
(in thousands, except unit data)
For the Years Ended December 31,
2000 1999 1998
VMS National Properties net loss $ (38) $(6,272) $(6,948)
Portfolio I net loss (1) (63) (5)
Portfolio II net loss (1) (67) (5)
Combined net loss $ (40) $(6,402) $(6,958)
Portfolio I allocation: 70.69% $ (27) $(4,433) $(4,912)
(1) (63) (5)
$ (28) $(4,496) $(4,917)
Net loss to general partner (2%) $ (1) $ (90) $ (98)
Net loss to limited partners (98%) $ (27) $(4,406) $(4,819)
Number of Limited Partner interests 644 644 644
Net loss per limited Partnership
Interest $ (43) $(6,842) $(7,483)
Portfolio II allocation: 29.31% $ (11) $(1,839) $(2,036)
(1) (67) (5)
$ (12) $(1,906) $(2,041)
Net loss to general partner (2%) $ -- $ (38) $ (41)
Net loss to limited partners (98%) $ (12) $(1,868) $(2,000)
Number of Limited Partner interests 267 267 267
Net loss per limited Partnership
interest $ (45) $(6,992) $(7,493)
EXHIBIT INDEX
Exhibit No. Description
3 and 21 Portions of the Prospectus of the Partnership 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
Partnership 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.
10.1 Stipulation Regarding Entry of Agreed Final Judgment of Foreclosure
and Order Relieving Receiver of Obligation to Operate Subject Property
- Kendall Mall is incorporated by reference to the Form 10-QSB dated
June 30, 1995.
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.
11 Calculation of Net Income (Loss) Per Investor.