FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
(As last amended by 34-32231, eff. 6/3/93.)
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
[ ] 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 0-13530
DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.
(Exact name of small business issuer as specified in its charter)
Delaware 62-1181565
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.
CONSOLIDATED BALANCE SHEET
(in thousands, except unit data)
(Unaudited)
September 30, 1996
Assets
Cash:
Unrestricted $ 637
Restricted-tenant security deposits 94
Accounts receivable 15
Escrows for taxes and insurance 121
Restricted escrows 260
Other assets 227
Investment properties:
Land $ 1,072
Buildings and related personal property 11,486
12,558
Less accumulated depreciation (5,972) 6,586
$ 7,940
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 29
Tenant security deposits 94
Accrued taxes 220
Other liabilities 173
Due to affiliates 321
Mortgage notes payable 8,559
Partners' Deficit
General partners $ (95)
Limited partners (751.59 units
issued and outstanding) (1,361) (1,456)
$ 7,940
See Accompanying Notes to Consolidated Financial Statements
b) DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 701 $ 696 $ 2,091 $2,058
Other income 62 57 168 173
Total revenues 763 753 2,259 2,231
Expenses:
Operating 224 206 669 607
General and administrative 27 24 90 86
Maintenance 126 109 305 279
Depreciation 136 123 393 361
Interest 218 219 654 659
Property taxes 59 63 172 177
Total expenses 790 744 2,283 2,169
Net income (loss) $ (27) $ 9 $ (24) $ 62
Net income (loss) allocated
to general partners (5%) $ (1) $ -- $ (1) $ 3
Net income (loss) allocated
to limited partners (95%) (26) 9 (23) 59
$ (27) $ 9 $ (24) $ 62
Net income (loss) per limited
partnership unit $(34.59) $12.08 $(30.60) $78.69
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
c) DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partners Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 751.84 $ 1 $ 15,008 $ 15,009
Partners' deficit at
December 31, 1995 751.59 $ (73) $ (956) $ (1,029)
Distributions to partners -- (21) (382) (403)
Net loss for the nine months
ended September 30, 1996 -- (1) (23) (24)
Partners' deficit at
September 30, 1996 751.59 $ (95) $ (1,361) $ (1,456)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1996 1995
Cash flows from operating activities:
Net income (loss) $ (24) $ 62
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 393 361
Amortization of discounts and loan costs 47 47
Change in accounts:
Restricted cash (7) (6)
Accounts receivable (2) 5
Escrows for taxes and insurance 35 18
Other assets (14) (13)
Accounts payable (17) (50)
Tenant security deposit liabilities 8 5
Accrued taxes (11) (14)
Other liabilities (10) 8
Net cash provided by operating
activities 398 423
Cash flows from investing activities:
Property improvements and replacements (182) (172)
Deposits to restricted escrows (59) (57)
Receipts from restricted escrows 93 3
Net cash used in investing activities (148) (226)
Cash flows from financing activities:
Payments on mortgage notes payable (78) (72)
Distributions to partners (403) (154)
Net cash used in financing activities (481) (226)
Net decrease in cash (231) (29)
Cash at beginning of period 868 810
Cash at end of period $ 637 $ 781
Supplemental disclosure of cash flow information:
Cash paid for interest $ 606 $ 612
See Accompanying Notes to Consolidated Financial Statements
e) DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Davidson
Diversified Real Estate I, L.P. (the "Partnership") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. 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 the Managing General Partner (Davidson
Diversified Properties, Inc.), all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and nine month periods ended September 30, 1996,
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1996. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Partnership's annual
report on Form 10-KSB for the year ended December 31, 1995.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
NOTE B - DUE TO AFFILIATES
The Partnership is liable to a company affiliated with the Managing General
Partner through common ownership for real estate commissions in the amounts of
$124,500 for Revere Village and $196,330 for Essex which were sold in previous
years. Payment of the commissions will not be made to the affiliated company
until after payment to the limited partners of their original invested capital,
plus 8% per annum cumulative non-compounded on their adjusted invested capital
commencing on the last day of the calendar quarter in which each limited partner
was admitted to the Partnership through the date of payment.
NOTE C - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
partnership activities. The Partnership Agreement provides for payments to
affiliates for services and reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. The following amounts were paid to
affiliates of the Managing General Partner for such services and reimbursements
during 1996 and 1995:
Nine Months Ended
September 30,
1996 1995
(in thousands)
Property management fees $113 $ 110
Reimbursement for services of affiliates 63 64
The Partnership insures its properties under a master policy through an
agency and insurer unaffiliated with the Managing General Partner. An affiliate
of the Managing General Partner acquired, in the acquisition of a business,
certain financial obligations from an insurance agency which was later acquired
by the agent who placed the current year's master policy. The current agent
assumed the financial obligations to the affiliate of the Managing General
Partner who receives payments on these obligations from the agent. The amount
of the partnership's insurance premiums accruing to the benefit of the affiliate
of the Managing General Partner by virtue of the agent's obligations is not
significant.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment properties consist of two apartment complexes.
The following table sets forth the average occupancy of the properties for the
nine months ended September 30, 1996 and 1995:
Average
Occupancy
1996 1995
Ashley Woods Apartments
Cincinnati, Ohio 93% 95%
Versailles on the Lake Apartments
Fort Wayne, Indiana 94% 95%
The Partnership realized a net loss of $24,000 for the nine months ended
September 30, 1996, compared to net income of $62,000 for the nine months ended
September 30, 1995. The Partnership realized a net loss of $27,000 for the three
months ended September 30, 1996, compared to net income of $9,000 for the
corresponding period of 1995. The net loss for the nine month period ended
September 30, 1996 is primarily due to increases in operating, maintenance and
depreciation expenses during the first nine months of 1996. Operating expenses
increased due to increased advertising and commissions for tenant referrals at
Ashley Woods Apartments, and maintenance salary increases at both properties due
to the hiring of additional maintenance technicians in late 1995. Depreciation
expenses also increased due to approximately $230,000 of property improvements
completed in 1995. Mitigating these expense increases were increases in rental
revenues caused by increased rental rates at both properties.
As part of the ongoing business plan of the Partnership, 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 Partnership from increases in
expenses. As part of this plan, the Managing General Partner attempts to
protect the Partnership 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.
At September 30, 1996, the Partnership held unrestricted cash of $637,000
compared to $781,000 at September 30, 1995. Net cash provided by operations
decreased primarily due to increased operating and maintenance expenses as noted
above. Net cash used in investing activities decreased due to increased
receipts from restricted escrows. Net cash used in financing activities
increased due to greater distributions to partners during the first nine months
of 1996 compared to the corresponding period of 1995.
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 property to adequately maintain the physical assets
and other operating needs of the Partnership. Such assets are currently thought
to be sufficient for any near-term needs of the partnership. The mortgage
indebtedness of $8,559,000, net of discount, is amortized over varying periods.
Of this amount, $5,985,000, which matures in 2000, relates to Ashley Woods and
$2,574,000, which matures in 2002, relates to Versailles on the Lake. At the
time of maturity, the properties are expected to be either sold or refinanced.
Distributions to partners of $403,000 and $154,000 were made during the nine
months ending September 30, 1996 and 1995, respectively. Future cash
distributions will depend on the levels of net cash generated from operations,
property sales and the availability of cash reserves.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27, Financial Data Schedule.
b) Reports on Form 8-K:
None filed during the quarter ended September 30, 1996.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DAVIDSON DIVERSIFIED REAL ESTATE I
By: Davidson Diversified Properties, Inc.
Managing General Partner
By: /s/Carroll D. Vinson
Carroll D. Vinson
President
By: /s/Robert D. Long, Jr.
Vice President/CAO
Date: November 8, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Davidson
Diversified Real Estate I, L.P. 1996 Third Quarter 10-QSB and is qualified in
its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000721673
<NAME> DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 637
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 12,558
<DEPRECIATION> 5,972
<TOTAL-ASSETS> 7,940
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 8,559
0
0
<COMMON> 0
<OTHER-SE> (1,456)
<TOTAL-LIABILITY-AND-EQUITY> 7,940
<SALES> 0
<TOTAL-REVENUES> 2,259
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,283
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 654
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24)
<EPS-PRIMARY> (30.60)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
