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 March 31, 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)
March 31, 1996
Assets
Cash:
Unrestricted $ 672
Restricted-tenant security deposits 93
Accounts receivable 8
Escrows for taxes and insurance 161
Restricted escrows 315
Other assets 220
Investment properties:
Land $ 1,072
Buildings and related personal property 11,338
12,410
Less accumulated depreciation (5,707) 6,703
$8,172
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 25
Tenant security deposits 92
Accrued taxes 224
Other liabilities 197
Due to affiliates 321
Mortgage notes payable 8,602
Partners' Deficit
General partners $ (86)
Limited partners (751.59 units
issued and outstanding) (1,203) (1,289)
$ 8,172
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
March 31,
1996 1995
<S> <C> <C>
Revenues:
Rental income $ 679 $ 673
Other income 54 48
Total revenues 733 721
Expenses:
Operating 223 189
General and administrative 31 23
Maintenance 78 60
Depreciation 128 121
Interest 218 220
Property taxes 62 51
Total expenses 740 664
Net (loss) income $ (7) $ 57
Net (loss) income allocated
to general partners (5%) $ -- $ 3
Net (loss) income allocated
to limited partners (95%) (7) 54
$ (7) $ 57
Net (loss) income per limited
partnership unit $(8.71) $71.85
<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 loss for the three months
ended March 31, 1996 -- -- (7) (7)
Partners' deficit at
March 31, 1996 751.59 $ (86) $ (1,203) $ (1,289)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (7) $ 57
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 128 121
Amortization of discounts and loan costs 15 15
Change in accounts:
Restricted cash (6) (4)
Accounts receivable 6 8
Escrows for taxes and insurance (5) (7)
Other assets 15 16
Accounts payable (21) 53
Tenant security deposit liabilities 6 4
Accrued taxes (8) (21)
Other liabilities 14 (6)
Net cash provided by operating
activities 137 236
Cash flows from investing activities:
Property improvements and replacements (34) (33)
Deposits to restricted escrows (21) (18)
Receipts from restricted escrows -- 3
Net cash used in investing activities (55) (48)
Cash flows from financing activities:
Payments on mortgage notes payable (25) (23)
Distributions to partners (253) (154)
Net cash used in financing activities (278) (177)
Net (decrease) increase in cash (196) 11
Cash at beginning of period 868 810
Cash at end of period $ 672 $ 821
Supplemental disclosure of cash flow information:
Cash paid for interest $ 203 $ 205
<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, 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, 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:
Three Months Ended
March 31,
1996 1995
(in thousands)
Property management fees $ 37 $ 36
Reimbursement for services of affiliates 18 17
Note C - Transactions with Affiliated Parties (continued)
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
quarters ended March 31, 1996 and 1995:
Average
Occupancy
1996 1995
Ashley Woods Apartments
Cincinnati, Ohio 91% 95%
Versailles on the Lake Apartments
Fort Wayne, Indiana 92% 92%
The Managing General Partner attributes the decrease in occupancy at Ashley
Woods to the closing of several businesses in the area. Although there was a
significant decrease in occupancy in the first quarter at Ashley Woods, the
Partnership expects this occupancy decrease to be short-term.
The Partnership realized a net loss for the quarter ended March 31, 1996, of
$7,000 compared to net income of $57,000 for the corresponding period of 1995.
The Managing General Partner attributes the net loss to increases in operating,
general and administrative and maintenance expenses during the first quarter of
1996. Operating expense increased due to increased advertising and commissions
for tenant referrals at Ashley Woods Apartments. Collection costs also
increased at Ashley Woods due to job losses in the area. General and
administrative expense increased due to an increase in insurance expense
resulting from additional coverage. Maintenance expense increased due to
resurfacing the tennis courts at Ashley Woods and refurbishing a number of
apartments due to tenant turnover at Versailles on the Lake. Maintenance
expense also increased due to the cost of snow removal as a result of the severe
winter experienced by both properties. Offsetting these increases in expense
was an increase in other income due to the renegotiation of laundry contracts at
Ashley Woods and Versailles on the Lake.
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 March 31, 1996, the Partnership held unrestricted cash of $672,000
compared to $821,000 at March 31, 1995. Net cash provided by operating
activities decreased primarily due to the increased expenses discussed above as
well as fewer collections of prepaid rent from tenants. Net cash used in
investing activities increased as a result of increased deposits to restricted
escrows. Net cash used in financing activities increased due to greater
distributions to partners in the first quarter of 1996 compared to the first
quarter of 1995.
The Partnership has no material capital programs scheduled to be performed in
1996, although certain routine capital expenditures and maintenance expenses
have been budgeted. These capital expenditures and maintenance expenses will be
incurred only if cash is available from operations or the repairs are funded
from the capital reserve 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 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 $8,602,000, net of discount, is amortized over varying periods.
Of this amount, $6,003,000, which matures in 2000, relates to Ashley Woods and
$2,599,000, 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 first
quarter of 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, is filed as an exhibit to this
report.
b) Reports on Form 8-K:
None filed during the quarter ended March 31, 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: May 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Davidson
Diversified Real Estate I 1996 First 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 672
<SECURITIES> 0
<RECEIVABLES> 8
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 12,410
<DEPRECIATION> 5,707
<TOTAL-ASSETS> 8,172
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 8,602
0
0
<COMMON> 0
<OTHER-SE> (1,289)
<TOTAL-LIABILITY-AND-EQUITY> 8,172
<SALES> 0
<TOTAL-REVENUES> 733
<CGS> 0
<TOTAL-COSTS> 740
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 218
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7)
<EPS-PRIMARY> (8.71)
<EPS-DILUTED> 0
<FN>
<F1>The Partnership has an unclassified balance sheet.
</FN>
</TABLE>
