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 June 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)
June 30, 1996
Assets
Cash:
Unrestricted $ 794
Restricted-tenant security deposits 93
Accounts receivable 10
Escrows for taxes and insurance 54
Restricted escrows 244
Other assets 256
Investment properties:
Land $ 1,072
Buildings and related personal property 11,391
12,463
Less accumulated depreciation (5,836) 6,627
$ 8,078
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 42
Tenant security deposits 92
Accrued taxes 162
Other liabilities 159
Due to affiliates 321
Mortgage notes payable 8,581
Partners' Deficit
General partners $ (86)
Limited partners (751.59 units
issued and outstanding) (1,193) (1,279)
$ 8,078
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 Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 711 $ 689 $1,390 $1,362
Other income 52 68 106 116
Total revenues 763 757 1,496 1,478
Expenses:
Operating 222 212 445 401
General and administrative 32 39 63 62
Maintenance 101 111 179 170
Depreciation 129 116 257 238
Interest 218 220 436 440
Property taxes 51 63 113 114
Total expenses 753 761 1,493 1,425
Net income (loss) $ 10 $ (4) $ 3 $ 53
Net income (loss) allocated
to general partners (5%) $ -- $ -- $ -- $ 3
Net income (loss) allocated
to limited partners (95%) 10 (4) 3 50
$ 10 $ (4) $ 3 $ 53
Net income (loss) per limited
partnership unit $13.31 $(5.06) $ 3.99 $66.61
<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 -- (13) (240) (253)
Net income for the six months
ended June 30, 1996 -- -- 3 3
Partners' deficit at
June 30, 1996 751.59 $ (86) $ (1,193) $ (1,279)
<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)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3 $ 53
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 257 238
Amortization of discounts and loan costs 31 31
Change in accounts:
Restricted cash (6) (6)
Accounts receivable 3 8
Escrows for taxes and insurance 102 96
Other assets (32) (29)
Accounts payable (4) (3)
Tenant security deposit liabilities 6 6
Accrued taxes (69) (75)
Other liabilities (24) 65
Net cash provided by operating
activities 267 384
Cash flows from investing activities:
Property improvements and replacements (87) (92)
Deposits to restricted escrows (39) (36)
Receipts from restricted escrows 89 3
Net cash used in investing activities (37) (125)
Cash flows from financing activities:
Payments on mortgage notes payable (51) (47)
Distributions to partners (253) (154)
Net cash used in financing activities (304) (201)
Net (decrease) increase in cash (74) 58
Cash at beginning of period 868 810
Cash at end of period $ 794 $ 868
Supplemental disclosure of cash flow information:
Cash paid for interest $ 405 $ 409
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
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 six month periods ended June 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 as 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 in 1996 and 1995:
Six Months Ended
June 30,
1996 1995
(in thousands)
Property management fees $ 76 $ 73
Reimbursement for services of affiliates 43 50
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
six months ended June 30, 1996 and 1995:
Average
Occupancy
1996 1995
Ashley Woods Apartments
Cincinnati, Ohio 93% 95%
Versailles on the Lake Apartments
Fort Wayne, Indiana 94% 93%
The Partnership realized net income for the six months ended June 30, 1996,
of $3,000 compared to $53,000 for the six months ended June 30, 1995. The
Partnership realized net income of $10,000 for the three months ended June 30,
1996, compared to a net loss of $4,000 for the corresponding period of 1995.
The decrease in net income for the six month period ended June 30, 1996, is
primarily due to increases in operating and depreciation expenses during the
first six 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 expense also
increased due to approximately $230,000 of property improvements completed in
1995. Mitigating these expense increases were increased rental revenues caused
by increases in 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 June 30, 1996, the Partnership held unrestricted cash of $794,000
compared to $868,000 at June 30, 1995. Net cash provided by operations
decreased primarily due to the increased expenses discussed above as well as
lower collections of prepaid rent from tenants. 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 in the first six 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 $8,581,000, net of discount, is amortized over varying
periods. Of this amount, $5,994,000, which matures in 2000, relates to Ashley
Woods and $2,587,000, which matures in 2002, relates to Versailles on the Lake.
At the time of maturity, the properties will either be sold or refinanced.
Distributions to partners of $253,000 and $154,000 were made during the six
months ending June 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 June 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.
Robert D. Long, Jr.
Vice President/CAO
Date: August 12, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Davidson
Diversified Real Estate I, L.P. 1996 Second 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 LP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 794
<SECURITIES> 0
<RECEIVABLES> 10
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 12,463
<DEPRECIATION> 5,836
<TOTAL-ASSETS> 8,078
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 8,581
0
0
<COMMON> 0
<OTHER-SE> (1,279)
<TOTAL-LIABILITY-AND-EQUITY> 8,078
<SALES> 0
<TOTAL-REVENUES> 1,496
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,493
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 436
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3
<EPS-PRIMARY> 3.99<F2>
<EPS-DILUTED> 0
<FN>
<F1>The Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
