UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________to _________
Commission file number 0-14194
VMS NATIONAL PROPERTIES JOINT VENTURE
(Exact name of registrant as specified in its charter)
Illinois 36-3311347
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No___
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes ___ No X_
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VMS NATIONAL PROPERTIES JOINT VENTURE
COMBINED BALANCE SHEETS
(in thousands)
March 31, December 31,
2004 2003
(Unaudited) (Note)
Assets:
Cash and cash equivalents $ 1,937 $ 1,761
Receivables and deposits 2,001 1,709
Restricted escrows 935 896
Other assets 1,275 585
Investment properties:
Land 13,404 13,404
Buildings and related personal property 152,375 152,044
165,779 165,448
Less accumulated depreciation (114,173) (112,389)
51,606 53,059
$ 57,754 $ 58,010
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 1,275 $ 1,154
Tenant security deposit liabilities 841 849
Accrued property taxes 870 600
Other liabilities 662 821
Accrued interest 834 798
Due to affiliate (Note D) 5,091 4,190
Mortgage notes payable, including $22,356 and $22,521
due to an affiliate at March 31, 2004 and
December 31, 2003, respectively (Note D) 123,635 124,242
Mortgage participation liability (Note C) 15,091 13,732
Notes payable (Note B) 42,060 42,060
Deferred gain on extinguishment of debt (Note B) 42,225 42,225
Partners' Deficit (174,830) (172,661)
$ 57,754 $ 58,010
Note: The combined balance sheet at December 31, 2003 has been derived from the
audited financial statements at that date but does not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See Accompanying Notes to Combined Financial Statements
VMS NATIONAL PROPERTIES JOINT VENTURE
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per partnership interest data)
Three Months Ended
March 31,
2004 2003
Revenues:
Rental income $ 6,885 $ 7,325
Other income 589 564
Casualty gain (Note E) -- 38
Total revenues 7,474 7,927
Expenses:
Operating 2,632 2,900
Property management fees to an affiliate (Note D) 298 323
General and administrative 145 150
Depreciation 1,784 1,737
Interest 4,247 4,123
Property taxes 537 514
Total expenses 9,643 9,747
Net loss $(2,169) $(1,820)
Net loss allocated to general partners (2%) $ (43) $ (37)
Net loss allocated to limited partners (98%) (2,126) (1,783)
$(2,169) $(1,820)
Net loss per limited partnership interest:
Portfolio I (644 interests issued and outstanding) $(2,334) $(1,958)
Portfolio II (267 interests issued and outstanding) $(2,333) $(1,955)
See Accompanying Notes to Combined Financial Statements
VMS NATIONAL PROPERTIES JOINT VENTURE
COMBINED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands)
VMS National Residential Portfolio I
Limited Partners
Limited
General Accumulated Subscription Partners'
Partners Deficit Notes Total Total
Partners' deficit at
December 31, 2003 $(3,742) $(117,311) $ (502) $(117,813) $(121,555)
Net loss for the
three months ended
March 31, 2004 (30) (1,503) -- (1,503) (1,533)
Partners' deficit at
March 31, 2004 $(3,772) $(118,814) $ (502) $(119,316) $(123,088)
VMS National Residential Portfolio II
Limited Partners
Limited
General Accumulated Subscription Partners'
Partners Deficit Notes Total Total
Partners' deficit at
December 31, 2003 $(1,566) $ (49,212) $ (328) $ (49,540) $ (51,106)
Net loss for the
three months ended
March 31, 2004 (13) (623) -- (623) (636)
Partners' deficit at
March 31, 2004 $(1,579) $ (49,835) $ (328) $ (50,163) $ (51,742)
Combined total $(5,351) $(168,649) $ (830) $(169,479) $(174,830)
See Accompanying Notes to Combined Financial Statements
VMS NATIONAL PROPERTIES JOINT VENTURE
COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2004 2003
Cash flows from operating activities:
Net loss $(2,169) $(1,820)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation 1,784 1,737
Amortization of mortgage discounts 1,359 1,219
Casualty gain -- (38)
Change in accounts:
Receivables and deposits (292) (428)
Other assets (690) 186
Accounts payable 404 179
Tenant security deposit liabilities (8) 15
Accrued property taxes 270 392
Accrued interest 515 198
Other liabilities (159) (58)
Due to affiliate 138 72
Net cash provided by operating activities 1,152 1,654
Cash flows from investing activities:
Property improvements and replacements (614) (1,047)
Net (deposits to) withdrawals from restricted escrows (39) 29
Insurance proceeds received -- 51
Net cash used in investing activities (653) (967)
Cash flows from financing activities:
Payments on mortgage notes payable (1,086) (1,513)
Advances from (payments to) an affiliate 763 (3)
Net cash used in financing activities (323) (1,516)
Net increase (decrease) in cash and cash equivalents 176 (829)
Cash and cash equivalents at beginning of period 1,761 2,809
Cash and cash equivalents at end of period $ 1,937 $ 1,980
Supplemental disclosure of cash flow information:
Cash paid for interest, including approximately $185 and
$507 paid to an affiliate $ 2,292 $ 2,637
Supplemental disclosure of non-cash activity:
Accrued interest added to mortgage notes payable $ 479 $ 202
At March 31, 2004 and December 31, 2003 accounts payable and property
improvements and replacements were adjusted by approximately $47,000 and
$330,000, respectively.
Included in property improvements and replacements for the three months ended
March 31, 2003 are approximately $25,000 of improvements which were included in
accounts payable at December 31, 2002.
See Accompanying Notes to Combined Financial Statements
VMS NATIONAL PROPERTIES JOINT VENTURE
NOTES TO COMBINED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited combined financial statements of VMS National
Properties Joint Venture (the "Venture" or "Registrant") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of MAERIL, Inc. ("MAERIL" or the "Managing General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three month period ended March 31, 2004 are not necessarily indicative of the
results which may be expected for the year ending December 31, 2004. For further
information, refer to the combined financial statements and footnotes thereto
included in the Venture's Annual Report on Form 10-K for the year ended December
31, 2003. The Managing General Partner is a wholly owned subsidiary of Apartment
Investment and Management Company ("AIMCO"), a publicly traded real estate
investment trust.
Reclassifications:
Certain reclassifications have been made to the 2003 balances to conform to the
2004 presentation.
Note B - Deferred Gain and Notes Payable
Deferred Gain on Extinguishment of Debt:
When the senior and junior loans refinanced in 1997, the senior loans were
recorded at the agreed valuation amount of $110,000,000, which was less than the
$152,225,000 face amount of the senior debt. If the Venture defaults on the
mortgage notes payable or is unable to pay the outstanding agreed valuation
amounts upon maturity, then the note face amounts become due. Accordingly, the
Venture deferred recognition of a gain of $42,225,000, which is the difference
between the note face amounts and the agreed valuation amounts.
Assignment Note:
The Venture executed a purchase money subordinated note (the "Assignment Note")
payable to the VMS/Stout Venture, an affiliate of the former general partner, in
exchange for the assignment by the VMS/Stout Venture of its interest in the
contract of sale to the Venture. The Assignment Note is collateralized by the
pledge from Portfolio I and Portfolio II of their respective interests in the
Venture.
In November 1993, VMS Realty Partners assigned its 50% interest in the VMS/Stout
Venture to the Partners Liquidating Trust which was established for the benefit
of the former creditors of VMS Realty Partners and its affiliates.
At March 31, 2004 and December 31, 2003, the $38,810,000 Assignment Note is
non-interest bearing and is payable only after payment of debt of higher
priority, including the senior and junior mortgage notes payable. Pursuant to
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%.
Interest expense was being recognized through the amortization of the discount
which became fully amortized in January 2000.
Long-Term Loan Arrangement Fee Note:
The Venture executed an unsecured, nonrecourse promissory note (the "Long-Term
Loan Arrangement Fee Note") payable to the VMS/Stout Venture as consideration
for arranging long-term financing.
The note in the amount of $3,250,000 does not bear interest and is payable only
after debt of a higher priority, including senior and junior mortgage loans,
have been repaid.
Note C - Participating Mortgage Note
AIMCO Properties LP, which owns the Managing General Partner and which is a
controlled affiliate of AIMCO, purchased (i) the junior debt on November 19,
1999; (ii) a significant interest in the residual value of the properties on
November 16, 1999, and (iii) a significant interest in the Bankruptcy Claims (as
defined below) effective September 2000. These transactions occurred between
AIMCO Properties, L.P. and an unrelated third party and thus had no effect on
the combined financial statements of the Venture. Residual value is defined as
the amount remaining from a sale of the Venture's investment properties or
refinancing of the mortgages encumbering such investment properties after
payment of selling or refinancing costs and repayment of the senior and junior
debt, plus accrued interest on each. The agreement states that the Venture will
retain an amount equal to $13,500,000 plus accrued interest at 10% compounded
monthly (the "Partnership Advance Account") from the proceeds. Interest began
accruing on the Partnership Advance Account in 1993 when the bankruptcy plan was
finalized. Any proceeds remaining after the Partnership Advance Account is fully
funded are split equally (the "50/50 Split") between the Venture and AIMCO
Properties, L.P. The Venture must repay the Assignment Note, the Long-term Loan
Arrangement Fee Note and other pre-petition claims (collectively the "Bankruptcy
Claims") which collectively total approximately $42,139,000 from the Partnership
Advance Account. Any amounts remaining in the Partnership Advance Account after
payment of the Bankruptcy Claims are split 75% to the Venture and 25% to AIMCO
Properties, L.P.
The Venture has recorded the estimated fair value of the participation feature
as a mortgage participation liability of approximately $36,518,000. During the
three months ended March 31, 2004 and 2003, the Venture amortized approximately
$1,359,000 and $1,219,000, respectively, of the mortgage participation debt
discount which is included in interest expense. The related mortgage
participation debt discount at March 31, 2004 and December 31, 2003 was
approximately $21,427,000 and $22,786,000, respectively. The fair value of the
participation feature was calculated based upon information currently available
to the Managing General Partner and depends largely upon the fair value of the
collateral properties. These fair values were determined using the net operating
income of the properties capitalized at a rate deemed reasonable for the type of
property adjusted for market conditions, the physical condition of the property
and other factors. The Managing General Partner evaluates the fair value of the
participation feature on an annual basis or as circumstances dictate that it
should be analyzed.
Note D - 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 Venture
activities. The Revised and Amended Asset Management Agreement provides for (i)
certain payments to affiliates for real estate advisory services and asset
management of the Venture's retained properties for an annual compensation of
$300,000, adjusted annually by the consumer price index and (ii) reimbursement
of certain expenses incurred by affiliates on behalf of the Venture up to
$100,000 per annum.
Asset management fees of approximately $81,000 were earned and owed to
affiliates of the Managing General Partner for each of the three months ended
March 31, 2004 and 2003. These fees are included in general and administrative
expense. At March 31, 2004, approximately $54,000 of such fees were owed and are
included in due to affiliates. No amounts were owed at December 31, 2003.
Affiliates of the Managing General Partner are entitled to receive a percentage
of the gross receipts from all of the Venture's properties as compensation for
providing property management services. The Venture paid to such affiliates
approximately $298,000 and $323,000 for the three months ended March 31, 2004
and 2003, respectively, which are included in operating expense.
Affiliates of the Managing General Partner are entitled to receive reimbursement
of accountable administrative expenses amounting to approximately $25,000 for
each of the three month periods ended March 31, 2004 and 2003. These expenses
are included in general and administrative expense. At March 31, 2004 and
December 31, 2003 approximately $8,000 and $4,000 of such fees were owed and are
included in due to affiliate.
During the three months ended March 31, 2004 and 2003, the Venture paid fees
related to construction management services provided by an affiliate of the
Managing General Partner of approximately $27,000 and $16,000, respectively. The
construction management service fees are calculated based on a percentage of
current additions to investment properties and are included in investment
properties.
An affiliate of the Managing General Partner received bookkeeping reimbursements
in the amount of approximately $31,000 for each of the three month periods ended
March 31, 2004 and 2003. These expenses are included in operating expense.
At March 31, 2004 and December 31, 2003, the Venture owed loans of approximately
$4,369,000 and $3,606,000 to an affiliate of the Managing General Partner plus
accrued interest thereon of approximately $660,000 and $580,000, respectively,
which are included in due to affiliate on the combined balance sheets. These
loans were made in accordance with the Joint Venture Agreement and bear interest
at the prime rate plus 3%. The Venture recognized interest expense of
approximately $80,000 and $70,000 during the three months ended March 31, 2004
and 2003, respectively. Subsequent to March 31, 2004, an affiliate of the
Managing General Partner loaned Scotchollow and Crosswood Apartments
approximately $300,000 and $70,000, respectively, to cover outstanding accounts
payable.
Prepetition property management fees were approved by the Bankruptcy Court for
payment to a former affiliate. This allowed claim may be paid only from
available Venture cash. At March 31, 2004 and December 31, 2003, the outstanding
balance of $79,000 is included in other liabilities.
Certain affiliates of the former general partners and the VMS/Stout Venture may
be entitled to receive various fees upon disposition of the properties. These
fees will be paid from the disposition proceeds and are subordinated to the
distributions required by the bankruptcy plan. There were no property
dispositions for which proceeds were received during either of the three month
periods ended March 31, 2004 or 2003.
The junior debt of approximately $22,356,000 and $22,521,000 at March 31, 2004
and December 31, 2003, respectively, is held by an affiliate of the Managing
General Partner. The monthly principal and interest payments are based on
monthly excess cash flow for each property, as defined in the mortgage
agreement. During the three months ended March 31, 2004 and 2003, the Venture
recognized interest expense of approximately $621,000 and $638,000,
respectively.
The Venture insures its properties up to certain limits through coverage
provided by AIMCO which is generally self-insured for a portion of losses and
liabilities related to workers compensation, property casualty and vehicle
liability. The Venture insures its properties above the AIMCO limits through
insurance policies obtained by AIMCO from insurers unaffiliated with the
Managing General Partner. During 2004, the Venture anticipates its cost for
insurance coverage and fees associated with policy claims administration
provided by AIMCO will be approximately $1,164,000. The Venture was charged
approximately $474,000 for 2003.
Note E - Casualty Gain
During the three months ended March 31, 2003, a net casualty gain of
approximately $38,000 was recorded at Shadowood Apartments. The casualty gain
related to a fire, occurring in September 2002, which caused damage to eight
units at the property. The gain was the result of the receipt of initial
insurance proceeds of approximately $51,000 during the first quarter of 2003
offset by approximately $13,000 of undepreciated property improvements and
replacements being written off. Additional insurance proceeds of approximately
$27,000 were received subsequent to March 31, 2003 and were recognized as an
additional gain during the second quarter of 2003.
Note F - Contingencies
On August 8, 2003 AIMCO Properties L.P., an affiliate of the Managing General
Partner, was served with a Complaint in the United States District Court,
District of Columbia alleging that AIMCO Properties L.P. willfully violated the
Fair Labor Standards Act (FLSA) by failing to pay maintenance workers overtime
for all hours worked in excess of forty per week. On March 5, 2004 Plaintiffs
filed an amended complaint also naming NHP Management Company, which is also an
affiliate of the Managing General Partner. The Complaint is styled as a
Collective Action under the FLSA and seeks to certify state subclasses in
California, Maryland, and the District of Columbia. Specifically, the plaintiffs
contend that AIMCO Properties L.P. failed to compensate maintenance workers for
time that they were required to be "on-call". Additionally, the Complaint
alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating
maintenance workers for time that they worked in responding to a call while
"on-call". The Defendants have filed an answer to the Amended Complaint denying
the substantive allegations. Discovery is currently underway.
The Managing General Partner does not anticipate that any costs to the Venture,
whether legal or settlement costs, associated with these cases will be material
to the Venture's overall operations.
The Venture is unaware of any other pending or outstanding litigation matters
involving it or its investment properties that are not of a routine nature
arising in the ordinary course of business.
Note F - Contingencies (continued)
Pursuant to a formal order of investigation received by AIMCO on March 29, 2004,
the Central Regional Office of the United States Securities and Exchange
Commission is conducting an investigation relating to certain matters. AIMCO
believes the areas of investigation include AIMCO's miscalculated monthly net
rental income figures in third quarter 2003, forecasted guidance, accounts
payable, rent concessions, vendor rebates, and capitalization of expenses and
payroll. AIMCO is cooperating fully. AIMCO does not believe that the ultimate
outcome will have a material adverse effect on its combined financial condition
or results of operations taken as a whole. Similarly, the Managing General
Partner does not believe that the ultimate outcome will have a material adverse
effect on the Venture's combined financial condition or results of operations
taken as a whole.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government regulations. Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including, without limitation: national and local
economic conditions; the terms of governmental regulations that affect the
Venture and interpretations of those regulations; the competitive environment in
which the Venture operates; financing risks, including the risk that cash flows
from operations may be insufficient to meet required payments of principal and
interest; real estate risks, including variations of real estate values and the
general economic climate in local markets and competition for tenants in such
markets; litigation, including costs associated with prosecuting and defending
claims and any adverse outcomes, and possible environmental liabilities. Readers
should carefully review the Venture's financial statements and the notes
thereto, as well as the risk factors described in the documents the Venture
files from time to time with the Securities and Exchange Commission.
Average occupancy rates for the three months ended March 31, 2004 and 2003, for
all of the Venture's properties are as follows:
Average Occupancy
Property 2004 2003
North Park Apartments (1)
Evansville, IN 96% 91%
Chapelle Le Grande (1)
Merrillville, IN 98% 93%
Terrace Gardens (2)
Omaha, NE 82% 88%
Forest Ridge Apartments
Flagstaff, AZ 91% 93%
Scotchollow (2)
San Mateo, CA 80% 92%
Pathfinder Village (2)
Fremont, CA 86% 94%
Buena Vista Apartments (3)
Pasadena, CA 92% 97%
Mountain View Apartments
San Dimas, CA 93% 94%
Crosswood Park
Citrus Heights, CA 93% 95%
Casa de Monterey (4)
Norwalk, CA 93% 97%
The Bluffs
Milwaukie, OR 90% 89%
Watergate Apartments (5)
Little Rock, AR 85% 93%
Shadowood Apartments (1)
Monroe, LA 93% 90%
Vista Village Apartments
El Paso, TX 96% 98%
The Towers of Westchester Park
College Park, MD 99% 98%
(1) The average occupancy at North Park Apartments, Chappelle Le Grande and
Shadowood Apartments increased due to the property management focusing on
increasing occupancy through tenant retention and more effective lease
management techniques which included staggering lease expiration dates.
(2) The decrease in occupancy at Terrace Gardens, Scotchollow and Pathfinder
Village is due to a weak economy in the property's market area.
(3) The decrease in occupancy at Buena Vista Apartments is primarily
attributable to a decrease in tenant retention. The property management
has implemented more effective lease management techniques which include
staggering lease expiration dates.
(4) Casa de Monterey occupancy decreased due to evictions of non paying
residents during the quarter.
(5) The decrease in occupancy at Watergate Apartments is primarily
attributable to property management raising the qualifying conditions for
prospective tenants in order to attract a more stable tenant population.
The Venture's financial results are dependent upon a number of factors including
the ability to attract and maintain tenants at the investment properties,
interest rates on mortgage loans, costs incurred to operate the investment
properties, general economic conditions and weather. As part of the ongoing
business plan of the Venture, the Managing General Partner monitors the rental
market environment of its investment properties to assess the feasibility of
increasing rents, maintaining or increasing occupancy levels and protecting the
Venture from increases in expenses. As part of this plan, the Managing General
Partner attempts to protect the Venture from the burden of inflation-related
increases in expenses by increasing rents and maintaining a high overall
occupancy level. However, the Managing General Partner may use rental
concessions and rental rate reductions to offset softening market conditions,
accordingly, there is no guarantee that the Managing General Partner will be
able to sustain such a plan. Further, a number of factors which are outside the
control of the Venture such as the local economic climate and weather can
adversely or positively impact the Venture's financial results.
Results of Operations
The Venture recorded a net loss for the three months ended March 31, 2004 of
approximately $2,169,000 compared to a net loss of approximately $1,820,000 for
the corresponding period in 2003. The increase in net loss for the three month
period is due to a decrease in total revenues partially offset by a decrease in
total expenses.
The decrease in total revenues is due to decreases in rental income and casualty
gains partially offset by an increase in other income. The decrease in rental
income is the result of the decrease in occupancy at ten of the Venture's
properties. These decreases more than offset the occupancy increases at five of
the Venture's properties. Other income increased primarily due to increases in
lease cancellation fees offset by a decrease in late charges charged by the
properties.
During the three months ended March 31, 2003 a net casualty gain of
approximately $38,000 was recorded at Shadowood Apartments. The casualty gain
related to a fire, occurring in September 2002, which caused damage to eight
units at the property. The gain was the result of the receipt of initial
insurance proceeds of approximately $51,000 during the first quarter of 2003
offset by approximately $13,000 of undepreciated property improvements and
replacements being written off. Additional insurance proceeds of approximately
$27,000 were received subsequent to March 31, 2003 and were recognized as an
additional gain during the second quarter of 2003.
Total expenses decreased primarily due to decreases in operating expenses and
property management fees partially offset by increases in depreciation, interest
and property tax expenses. General and administrative expenses remained
relatively constant for the comparable periods. Operating expenses decreased due
primarily to a decrease in maintenance expense partially offset by an increase
in property expense. Maintenance expense decreased due to a decrease in interior
painting and contract trash removal expense at five of the Venture's properties
and decreases in snow removal expense at Forest Ridge Apartments and The Towers
of Westchester Park. Property expense increased due to an increase in salaries
and related employee expenses and utilities at eight of the Venture's
properties. Property management fees decreased due to the decrease in rental
income on which these fees are based. Depreciation expense increased due to
property improvements and replacements placed into service during the past
twelve months which are now being depreciated. The increase in interest expense
is attributable to an increase in the amortization of the debt discount related
to the mortgage participation liability partially offset by a decrease in
interest on the senior and junior debt due to principal reduction payments.
Property tax expense increased due to increases in the assessed values at
Scotchollow and The Towers of Westchester Apartments.
Included in general and administrative expenses for the three months ended March
31, 2004 and 2003 are reimbursements to the Managing General Partner allowed
under the Partnership Agreement associated with its management of the Venture.
Costs associated with quarterly and annual communications with investors and
regulatory agencies and the annual audit required by the Partnership Agreement
are also included.
Liquidity and Capital Resources
At March 31, 2004, the Venture had cash and cash equivalents of approximately
$1,937,000 as compared to approximately $1,980,000 at March 31, 2003. Cash and
cash equivalents increased approximately $176,000 for the three months ended
March 31, 2004, from December 31, 2003. The increase in cash and cash
equivalents is a result of approximately $1,152,000 of cash provided by
operating activities partially offset by approximately $323,000 and $653,000 of
cash used in financing and investing activities, respectively. Cash used in
financing activities consisted of principal payments on the mortgages
encumbering the Venture's investment properties partially offset by advances
from an affiliate. Cash used in investing activities consisted of property
improvements and replacements and nets deposits to restricted escrow accounts
maintained by the mortgage lender.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Venture and to comply with Federal,
state and local legal and regulatory requirements. The Managing General Partner
monitors developments in the area of legal and regulatory compliance and is
studying new federal laws, including the Sarbanes-Oxley Act of 2002. The
Sarbanes-Oxley Act of 2002 mandates or suggests additional compliance measures
with regard to governance, disclosure, audit and other areas. In light of these
changes, the Venture expects that it will incur higher expenses related to
compliance, including increased legal and audit fees. Capital improvements
planned for each of the Venture's properties are detailed below.
The Venture is restricted to annual capital improvements of $300 per unit or
approximately $888,000 for all of the properties, which is the limit set by the
junior debt for funding of capital improvements.
North Park Apartments: The Venture completed approximately $28,000 in capital
expenditures at North Park Apartments during the three months ended March 31,
2004, consisting primarily of floor covering and HVAC replacements and
structural improvements. These improvements were funded from operating cash
flow. The Venture evaluates the capital improvement needs of the property during
the year and expects to complete an additional $57,000 in capital improvements
during the remainder of 2004. Additional improvements may be considered during
2004 and will depend on the physical condition of the property as well as debt
restrictions, replacement reserves and anticipated cash flow generated by the
property.
Chapelle Le Grande: The Venture completed approximately $3,000 in capital
expenditures at Chapelle Le Grande during the three months ended March 31, 2004,
consisting primarily of floor covering replacements. These improvements were
funded from operating cash flow. The Venture evaluates the capital improvement
needs of the property during the year and expects to complete an additional
$29,000 in capital improvements during the remainder of 2004. Additional
improvements may be considered during 2004 and will depend on the physical
condition of the property as well as debt restrictions, replacement reserves and
anticipated cash flow generated by the property.
Terrace Gardens: The Venture completed approximately $14,000 in capital
expenditures at Terrace Gardens during the three months ended March 31, 2004,
consisting primarily of floor covering replacements. These improvements were
funded from operating cash flow. The Venture evaluates the capital improvement
needs of the property during the year and expects to complete an additional
$24,000 in capital improvements during the remainder of 2004. Additional
improvements may be considered during 2004 and will depend on the physical
condition of the property as well as debt restrictions, replacement reserves and
anticipated cash flow generated by the property.
Forest Ridge Apartments: The Venture completed approximately $14,000 in capital
expenditures at Forest Ridge Apartments during the three months ended March 31,
2004, consisting primarily of floor covering and water heater replacements.
These improvements were funded from operating cash flow. The Venture evaluates
the capital improvement needs of the property during the year and expects to
complete an additional $69,000 in capital improvements during the remainder of
2004. Additional improvements may be considered during 2004 and will depend on
the physical condition of the property as well as debt restrictions, replacement
reserves and anticipated cash flow generated by the property.
Scotchollow: The Venture completed approximately $30,000 in capital expenditures
at Scotchollow during the three months ended March 31, 2004, consisting
primarily of countertop replacements, heating upgrades and interior decorations.
These improvements were funded from operating cash flow. The Venture evaluates
the capital improvement needs of the property during the year and expects to
complete an additional $95,000 in capital improvements during the remainder of
2004. Additional improvements may be considered during 2004 and will depend on
the physical condition of the property as well as debt restrictions, replacement
reserves and anticipated cash flow generated by the property.
Pathfinder Village: The Venture completed approximately $44,000 in capital
expenditures at Pathfinder Village during the three months ended March 31, 2004,
consisting primarily of floor covering replacements, major landscaping and
parking lot resurfacing. These improvements were funded from operating cash
flow. The Venture evaluates the capital improvement needs of the property during
the year and expects to complete an additional $30,000 in capital improvements
during the remainder of 2004. Additional improvements may be considered during
2004 and will depend on the physical condition of the property as well as debt
restrictions, replacement reserves and anticipated cash flow generated by the
property.
Buena Vista Apartments: The Venture completed approximately $5,000 in capital
expenditures at Buena Vista Apartments during the three months ended March 31,
2004, consisting primarily of floor covering replacements. These improvements
were funded from operating cash flow. The Venture evaluates the capital
improvement needs of the property during the year and expects to complete an
additional $23,000 in capital improvements during the remainder of 2004.
Additional improvements may be considered during 2004 and will depend on the
physical condition of the property as well as debt restrictions, replacement
reserves and anticipated cash flow generated by the property.
Mountain View Apartments: The Venture completed approximately $33,000 in capital
expenditures at Mountain View Apartments during the three months ended March 31,
2004, consisting primarily of floor covering and water heater replacements and
plumbing fixture upgrades. These improvements were funded from operating cash
flow. The Venture evaluates the capital improvement needs of the property during
the year and expects to complete an additional $17,000 in capital improvements
during the remainder of 2004. Additional improvements may be considered during
2004 and will depend on the physical condition of the property as well as debt
restrictions, replacement reserves and anticipated cash flow generated by the
property.
Crosswood Park: The Venture completed approximately $53,000 in capital
expenditures at Crosswood Park during the three months ended March 31, 2004,
consisting primarily of structural improvements, floor covering replacements and
plumbing fixture upgrades. These improvements were funded from operating cash
flow and replacement reserves. Additional improvements may be considered during
2004 and will depend on the physical condition of the property as well as debt
restrictions, replacement reserves and anticipated cash flow generated by the
property.
Casa de Monterey: The Venture completed approximately $25,000 in capital
expenditures at Casa de Monterey during the three months ended March 31, 2004,
consisting primarily of floor covering replacements and parking lot resurfacing.
These improvements were funded from operating cash flow. The Venture evaluates
the capital improvement needs of the property during the year and expects to
complete an additional $18,000 in capital improvements during the remainder of
2004. Additional improvements may be considered during 2004 and will depend on
the physical condition of the property as well as debt restrictions, replacement
reserves and anticipated cash flow generated by the property.
The Bluffs: The Venture completed approximately $7,000 in capital expenditures
at The Bluffs during the three months ended March 31, 2004, consisting primarily
of floor covering replacements. These improvements were funded from operating
cash flow. The Venture evaluates the capital improvement needs of the property
during the year and expects to complete an additional $34,000 in capital
improvements during the remainder of 2004. Additional improvements may be
considered during 2004 and will depend on the physical condition of the property
as well as debt restrictions, replacement reserves and anticipated cash flow
generated by the property.
Watergate Apartments: The Venture completed approximately $42,000 in capital
expenditures at Watergate Apartments during the three months ended March 31,
2004, consisting primarily of plumbing fixture upgrades, floor covering
replacements and interior painting. These improvements were funded from
operating cash flow and replacement reserves. Additional improvements may be
considered during 2004 and will depend on the physical condition of the property
as well as debt restrictions, replacement reserves and anticipated cash flow
generated by the property.
Shadowood Apartments: The Venture completed approximately $9,000 in capital
expenditures at Shadowood Apartments during the three months ended March 31,
2004, consisting primarily of floor covering replacements. These improvements
were funded from operating cash flow and replacement reserves. The Venture
evaluates the capital improvement needs of the property during the year and
expects to complete an additional $28,000 in capital improvements during the
remainder of 2004. Additional improvements may be considered during 2004 and
will depend on the physical condition of the property as well as debt
restrictions, replacement reserves and anticipated cash flow generated by the
property.
Vista Village Apartments: The Venture completed approximately $9,000 in capital
expenditures at Vista Village Apartments during the three months ended March 31,
2004, consisting primarily of floor covering and water heater replacements.
These improvements were funded from operating cash flow. The Venture evaluates
the capital improvement needs of the property during the year and expects to
complete an additional $57,000 in capital improvements during the remainder of
2004. Additional improvements may be considered during 2004 and will depend on
the physical condition of the property as well as debt restrictions, replacement
reserves and anticipated cash flow generated by the property.
The Towers of Westchester Park: The Venture completed approximately $15,000 in
capital expenditures at Towers of Westchester Park during the three months ended
March 31, 2004, consisting primarily of cabinet and air conditioning upgrades
and floor covering replacements. These improvements were funded from operating
cash flow. The Venture evaluates the capital improvement needs of the property
during the year and expects to complete an additional $76,000 in capital
improvements during the remainder of 2004. Additional improvements may be
considered during 2004 and will depend on the physical condition of the property
as well as debt restrictions, replacement reserves and anticipated cash flow
generated by the property.
The Registrant's assets are thought to be sufficient for any near-term needs
(exclusive of capital improvements) of the Registrant. The senior debt
encumbering all of the properties totals approximately $101,279,000 and is being
amortized over 25 years, with a balloon payment of $93,243,000 due January 2008.
Not including the debt discount relating to the mortgage participation
liability, the junior debt, which also matures January 2008, totals
approximately $22,356,000 and requires monthly payments based upon monthly
excess cash flow for each property. The Assignment Note and Long-Term
Arrangement Fee Notes totaling approximately $42,060,000 are non-interest
bearing and are subordinate to the senior and junior debt and are only payable
from the proceeds of the sale or refinancing of the properties.
There were no cash distributions to the partners of either of the Partnerships
for the three months ended March 31, 2004 and 2003. In accordance with the
respective Agreements of Limited Partnership, there are no material restrictions
on the Partnerships' ability to make cash distributions. Future cash
distributions are subject to the order of distributions as stipulated by the
Venture's Plan of Reorganization. The source of future distributions will depend
upon the levels of net cash generated from operations, the availability of cash
reserves, and timing of debt maturities, refinancings and/or property sales. The
Partnerships' distribution policies are reviewed on a quarterly basis. There can
be no assurance that the Partnerships will generate sufficient funds from
operations, after required capital expenditures and the order of distributions
as stipulated by the Venture's Plan of Reorganization, to permit any
distributions to partners during the remainder of 2004 or subsequent periods.
Other
As a result of tender offers, AIMCO and its affiliates currently own 119 units
of limited partnership interest in Portfolio I representing 18.48% of the
outstanding limited partnership interests, along with the 2% general partner
interest for a combined ownership in Portfolio I of 20.48%. AIMCO and its
affiliates currently own 67.42 units of limited partnership interest in
Portfolio II representing 25.25% of the outstanding limited partnership
interests, along with the 2% general partner interest for a combined ownership
in Portfolio II of 27.25%. The Venture is owned 70.69% by Portfolio I and 29.31%
by Portfolio II which results in AIMCO and its affiliates currently owning
22.47% of the Venture. It is possible that AIMCO or its affiliates will make one
or more additional offers to acquire additional units of limited partnership
interest in the Venture in exchange for cash or a combination of cash and units
in AIMCO Properties, L.P., the operating partnership of AIMCO, either through
private purchases or tender offers. Under the Partnership Agreements,
unitholders holding a majority of the Units are entitled to take action with
respect to a variety of matters, which would include without limitation, voting
on certain amendments to the Venture Agreement and voting to remove the Managing
General Partner. Although the Managing General Partner owes fiduciary duties to
the limited partners of the Venture, the Managing General Partner also owes
fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of
the Managing General Partner, as managing general partner, to the Venture and
its limited partners may come into conflict with the duties of the Managing
General Partner to AIMCO, as its sole stockholder.
Critical Accounting Policies and Estimates
The combined financial statements are prepared in accordance with accounting
principles generally accepted in the United States which require the Venture to
make estimates and assumptions. The Venture believes that of its significant
accounting policies, the following may involve a higher degree of judgment and
complexity.
Impairment of Long-Lived Assets
Investment properties are recorded at cost, less accumulated depreciation,
unless considered impaired. If events or circumstances indicate that the
carrying amount of a property may be impaired, the Venture will make an
assessment of its recoverability by estimating the undiscounted future cash
flows, excluding interest charges, of the property. If the carrying amount
exceeds the aggregate future cash flows, the Venture would recognize an
impairment loss to the extent the carrying amount exceeds the fair value of the
property.
Real property investments are subject to varying degrees of risk. Several
factors may adversely affect the economic performance and value of the Venture's
investment properties. These factors include, but are not limited to, changes in
the national, regional and local economic climate; local conditions, such as an
oversupply of multifamily properties; competition from other available
multifamily property owners and changes in market rental rates. Any adverse
changes in these factors could cause an impairment in the Venture's assets.
Revenue Recognition
The Venture generally leases apartment units for twelve-month terms or less.
Rental income attributable to leases is recognized monthly as it is earned. The
Venture evaluates all accounts receivable from residents and establishes an
allowance, after the application of security deposits, for accounts greater than
30 days past due on current tenants and all receivables due from former tenants.
The Venture will offer rental concessions during particularly slow months or in
response to heavy competition from other similar complexes in the area. Any
concessions given at the inception of the lease are amortized over the life of
the lease.
Participating Mortgage Note
The Venture has a participating mortgage note which requires it to record the
estimated fair value of the participation feature as a liability and a debt
discount. The fair value of the participation feature is calculated based upon
information currently available to the Managing General Partner and depends
largely upon the fair value of the collateral properties. These fair values are
determined using the net operating income of the properties capitalized at a
rate deemed reasonable for the type of property adjusted for market conditions,
physical condition of the property and other factors. The Managing General
Partner evaluates the fair value of the participation feature on an annual basis
or as circumstances dictate that it should be analyzed.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Venture is exposed to market risks from adverse changes in interest rates.
In this regard, changes in U.S. interest rates affect the interest earned on the
Venture's cash and cash equivalents as well as interest paid on its
indebtedness. As a policy, the Venture does not engage in speculative or
leveraged transactions, nor does it hold or issue financial instruments for
trading purposes. The Venture is exposed to changes in interest rates primarily
as a result of its borrowing activities used to maintain liquidity and fund
business operations. To mitigate the impact of fluctuations in U.S. interest
rates, the Venture maintains its debt as fixed rate in nature by borrowing on a
long-term basis except for advances made from an affiliate of the Managing
General Partner. These advances bear interest at the prime rate plus three basis
points. Based on interest rates at March 31, 2004, an increase or decrease of
100 basis points in market interest rates would not have a material impact on
the Venture.
The following table summarizes the Venture's debt obligations at March 31, 2004.
The interest rates represent the weighted-average rates. The fair value of the
Venture's first mortgages, after discounting the scheduled loan payments to
maturity, is approximately $107,784,000 at March 31, 2004. However, the Venture
is precluded from refinancing the first mortgage until January 2007. The
Managing General Partner believes that it is not appropriate to use the
Venture's incremental borrowing rate for the second mortgages, as there is
currently no market in which the Venture could obtain similar financing.
Therefore, the Managing General Partner considers estimation of fair value to be
impracticable for this indebtedness.
Long-term Debt
Principal Weighted-average
(in thousands) Interest Rate
2004 $ 1,360 8.50%
2005 2,022 8.50%
2006 2,201 8.50%
2007 2,403 8.50%
2008 115,649 8.95%
$123,635
As principal payments for the junior loans are based upon monthly cash flow, all
principal is assumed to be repaid at maturity.
ITEM 4. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures. The Venture's management, with the
participation of the principal executive officer and principal financial officer
of the Managing General Partner, who are the equivalent of the Venture's
principal executive officer and principal financial officer, respectively, has
evaluated the effectiveness of the Venture's disclosure controls and procedures
(as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the
period covered by this report. Based on such evaluation, the principal executive
officer and principal financial officer of the Managing General Partner, who are
the equivalent of the Venture's principal executive officer and principal
financial officer, respectively, have concluded that, as of the end of such
period, the Venture's disclosure controls and procedures are effective.
(b) Internal Control Over Financial Reporting. There have not been any changes
in the Venture's internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Venture's internal control over
financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 8, 2003 AIMCO Properties L.P., an affiliate of the Managing General
Partner, was served with a Complaint in the United States District Court,
District of Columbia alleging that AIMCO Properties L.P. willfully violated the
Fair Labor Standards Act (FLSA) by failing to pay maintenance workers overtime
for all hours worked in excess of forty per week. On March 5, 2004 Plaintiffs
filed an amended complaint also naming NHP Management Company, which is also an
affiliate of the Managing General Partner. The Complaint is styled as a
Collective Action under the FLSA and seeks to certify state subclasses in
California, Maryland, and the District of Columbia. Specifically, the plaintiffs
contend that AIMCO Properties L.P. failed to compensate maintenance workers for
time that they were required to be "on-call". Additionally, the Complaint
alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating
maintenance workers for time that they worked in responding to a call while
"on-call". The Defendants have filed an answer to the Amended Complaint denying
the substantive allegations. Discovery is currently underway.
The Managing General Partner does not anticipate that any costs to the Venture,
whether legal or settlement costs, associated with this case will be material to
the Venture's overall operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 3(a), VMS National Properties Joint Venture Agreement
(Exhibit 3 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 2003, is incorporated herein by
reference).
Exhibit 3(b), Amended and Restated Limited Partnership
Agreement and Certificate of Limited Partnership of VMS
National Properties Portfolio I (Exhibit 3 to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
2003, is incorporated herein by reference).
Exhibit 3(c), Amended and Restated Limited Partnership
Agreement and Certificate of Limited Partnership of VMS
National Properties Portfolio II (Exhibit 3 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 2003, is incorporated herein by reference).
Exhibit 11, Calculation of Net Loss Per Investor.
Exhibit 31.1, Certification of equivalent of Chief Executive
Officer pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 31.2, Certification of equivalent of Chief Financial
Officer pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 32.1, Certification Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
b) Reports on Form 8-K:
None filed during the quarter ended March 31, 2004.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
VMS NATIONAL PROPERTIES JOINT VENTURE
(Venture)
VMS National Residential Portfolio I
By: MAERIL, Inc.
Managing General Partner
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
By: /s/Thomas M. Herzog
Thomas M. Herzog
Senior Vice President
and Chief Accounting Officer
VMS National Residential Portfolio II
By: MAERIL, Inc.
Managing General Partner
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
By: /s/Thomas M. Herzog
Thomas M. Herzog
Senior Vice President
and Chief Accounting Officer
Date: May 13, 2004
Exhibit 11
VMS NATIONAL PROPERTIES JOINT VENTURE
CALCULATION OF NET LOSS PER INVESTOR
(in thousands, except per partnership interest data)
For the Three Months
Ended March 31,
2004 2003
VMS National Properties net loss $(2,169) $(1,820)
Portfolio I net loss -- --
Portfolio II net loss -- --
Combined net loss $(2,169) $(1,820)
Portfolio I allocation:
70.69% VMS National Properties net loss $(1,533) $(1,287)
100.00% Portfolio I net loss -- --
$(1,533) $(1,287)
Net loss to general partner (2%) $ (30) $ (26)
Net loss to limited partners (98%) $(1,503) $(1,261)
Number of Limited Partner units 644 644
Net loss per limited partnership interest $(2,334) $(1,958)
Portfolio II allocation:
29.31% VMS National Properties net loss $ (636) $ (533)
100.00% Portfolio II net loss -- --
$ (636) $ (533)
Net loss to general partner (2%) $ (13) $ (11)
Net loss to limited partners (98%) $ (623) $ (522)
Number of Limited Partner units 267 267
Net loss per limited partnership interest $(2,333) $(1,955)
Exhibit 31.1
CERTIFICATION
I, Martha L. Long, certify that:
1. I have reviewed this quarterly report on Form 10-Q of VMS National
Properties Joint Venture;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the Venture as of, and for, the periods presented in this report;
4. The Venture's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Venture and
have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
Venture, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period
in which this report is being prepared;
(b) Evaluated the effectiveness of the Venture's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
(c) Disclosed in this report any change in the Venture's internal
control over financial reporting that occurred during the Venture's
most recent fiscal quarter (the Venture's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the Venture's internal
control over financial reporting; and
5. The Venture's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the Venture's auditors and the audit committee of the Venture's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the Venture's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the Venture's
internal control over financial reporting.
Date: May 13, 2004
/s/Martha L. Long
Martha L. Long
Senior Vice President of MAERIL,
Inc., equivalent of the chief
executive officer of the Venture
Exhibit 31.2
CERTIFICATION
I, Thomas M. Herzog, certify that:
1. I have reviewed this quarterly report on Form 10-Q of VMS National
Properties Joint Venture;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the Venture as of, and for, the periods presented in this report;
4. The Venture's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Venture and
have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
Venture, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period
in which this report is being prepared;
(b) Evaluated the effectiveness of the Venture's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
(c) Disclosed in this report any change in the Venture's internal
control over financial reporting that occurred during the Venture's
most recent fiscal quarter (the Venture's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the Venture's internal
control over financial reporting; and
5. The Venture's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the Venture's auditors and the audit committee of the Venture's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the Venture's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the Venture's
internal control over financial reporting.
Date: May 13, 2004
/s/Thomas M. Herzog
Thomas M. Herzog
Senior Vice President and Chief
Accounting Officer of MAERIL,
Inc., equivalent of the chief
financial officer of the Venture
Exhibit 32.1
Certification of CEO and CFO
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of VMS National Properties
Joint Venture (the "Venture"), for the quarterly period ended March 31, 2004 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), Martha L. Long, as the equivalent of the Chief Executive Officer of
the Venture, and Thomas M. Herzog, as the equivalent of the Chief Financial
Officer of the Venture, each hereby certifies, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Venture.
/s/Martha L. Long
Name: Martha L. Long
Date: May 13, 2004
/s/Thomas M. Herzog
Name: Thomas M. Herzog
Date: May 13, 2004
This certification is furnished with this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Venture for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.