FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] 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)
(864) 239-1000
(Issuer's telephone number)
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
(Unaudited)
(in thousands, except unit data)
June 30, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 478
Restricted-tenant security deposits 95
Accounts receivable 8
Escrows for taxes and insurance 42
Restricted escrows 268
Other assets 220
Investment properties:
Land $ 1,072
Buildings and related personal property 11,726
12,798
Less accumulated depreciation (6,387) 6,411
$ 7,522
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 20
Tenant security deposits 95
Accrued taxes 167
Other liabilities 113
Due to affiliates 321
Mortgage notes payable 8,491
Partners' Deficit
General partners' $ (105)
Limited partners' (751.59 units
issued and outstanding) (1,580) (1,685)
$ 7,522
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,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 713 $ 711 $1,401 $1,390
Other income 51 52 100 106
Total revenues 764 763 1,501 1,496
Expenses:
Operating 235 222 462 445
General and administrative 27 32 56 63
Maintenance 92 101 156 179
Depreciation 140 129 276 257
Interest 216 218 431 436
Property taxes 60 51 123 113
Total expenses 770 753 1,504 1,493
Net (loss) income $ (6) $ 10 $ (3) $ 3
Net (loss) income allocated
to general partners (5%) $ -- $ -- $ -- $ --
Net (loss) income allocated
to limited partners (95%) (6) 10 (3) 3
$ (6) $ 10 $ (3) $ 3
Net (loss) income per limited
partnership unit $(7.98) $13.31 $(3.99) $ 3.99
<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, 1996 751.59 $ (95) $ (1,386) $ (1,481)
Distributions to partners -- (10) (191) (201)
Net loss for the six months
ended June 30, 1997 -- -- (3) (3)
Partners' deficit at
June 30, 1997 751.59 $ (105) $ (1,580) $ (1,685)
<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,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (3) $ 3
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Depreciation 276 257
Amortization of discounts and loan costs 32 31
Change in accounts:
Restricted cash (4) (6)
Accounts receivable 3 3
Escrows for taxes and insurance 95 102
Other assets (39) (32)
Accounts payable (25) (4)
Tenant security deposit liabilities 4 6
Accrued taxes (74) (69)
Other liabilities (24) (24)
Net cash provided by operating
activities 241 267
Cash flows from investing activities:
Property improvements and replacements (104) (87)
Deposits to restricted escrows (39) (39)
Receipts from restricted escrows -- 89
Net cash used in investing activities (143) (37)
Cash flows from financing activities:
Payments on mortgage notes payable (56) (51)
Distributions to partners (201) (253)
Net cash used in financing activities (257) (304)
Net decrease in unrestricted cash and cash equivalents (159) (74)
Unrestricted cash and cash equivalents at beginning
of period 637 868
Unrestricted cash and cash equivalents at end of period $ 478 $ 794
Supplemental disclosure of cash flow information:
Cash paid for interest $ 400 $ 405
<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 Davidson Diversified Properties, Inc.
(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 and six month periods ended June 30,
1997, are not necessarily indicative of the results that may be expected for the
year ending December 31, 1997. 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, 1996.
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
$125,000 for Revere Village and $196,000 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 property management services based on a percentage of revenue and
for reimbursement of certain expenses incurred by affiliates on behalf of the
Partnership. The following amounts were paid to affiliates of the Managing
General Partner during each of the six months ended June 30, 1997 and 1996 (in
thousands):
1997 1996
Property management fees (included in
operating expenses) $ 75 $ 76
Reimbursement for services of affiliates
(included in general and administrative
and operating expenses) 33 43
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 each of
the six months ended June 30, 1997 and 1996:
Average
Occupancy
1997 1996
Ashley Woods Apartments
Cincinnati, Ohio 89% 93%
Versailles on the Lake Apartments
Fort Wayne, Indiana 96% 94%
The Managing General Partner attributes the decrease in occupancy at Ashley
Woods to the closing of several businesses in the area as well as to the decline
in quality in the local economy.
The Partnership realized a net loss of approximately $3,000 for the six months
ended June 30, 1997, compared to net income of approximately $3,000 for the six
months ended June 30, 1996. The Partnership realized a net loss of
approximately $6,000 for the three months ended June 30, 1997, compared to net
income of $10,000 for the corresponding period of 1996. The increase in net
loss is primarily due to increased depreciation expense as a result of
approximately $104,000 of property improvements completed in the six months
ended June 30, 1997 in addition to approximately $318,000 of property
improvements completed in 1996. Also contributing to the net loss was an
increase in operating expenses at Ashley Woods, where resident relations costs,
concessions, and the manager's salary increased. These increased expenses are
partially offset by decreased maintenance expenses at Versailles, which
underwent exterior painting and building renovations as well as major
landscaping in 1996. Included in maintenance expense for 1997 is $23,000 of
major repairs and maintenance comprised of window coverings, parking lot repairs
and major landscaping. For 1996, maintenance expense includes $43,000 of major
repairs and maintenance comprised of tennis court repairs, window coverings,
exterior painting, interior and exterior building renovations and major
landscaping.
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, 1997, the Partnership held unrestricted cash and cash equivalents of
$478,000 compared to $794,000 at June 30, 1996. Net cash provided by operations
decreased primarily due to the change in accounts payable due to the timing of
payments. Net cash used in investing activities increased due to increased
property improvements as well as decreased receipts from restricted escrows.
Net cash used in financing activities decreased due to lower distributions to
the partners during 1997 compared to 1996.
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 various properties 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 $8,491,000, net of discount, is amortized over
varying periods. Of this amount, $5,957,000, which matures in 2000, relates to
Ashley Woods and $2,534,000, 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 $201,000 and $253,000 were made during
the six months ending June 30, 1997 and 1996, respectively. Future cash
distributions will depend on the levels of net cash generated from operations,
capital expenditure requirements, 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 June 30, 1997.
SIGNATURES
In accordance with the requirements 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.
DAVIDSON DIVERSIFIED REAL ESTATE I
By: Davidson Diversified Properties, Inc.
Its 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 1, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Davidson
Diversified Real Estate I, L.P. 1997 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, L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 478
<SECURITIES> 0
<RECEIVABLES> 8
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 12,798
<DEPRECIATION> 6,387
<TOTAL-ASSETS> 7,522
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 8,491
0
0
<COMMON> 0
<OTHER-SE> (1,685)
<TOTAL-LIABILITY-AND-EQUITY> 7,522
<SALES> 0
<TOTAL-REVENUES> 1,501
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,504
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 431
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3)
<EPS-PRIMARY> (3.79)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
