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
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 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) (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, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 461
Restricted-tenant security deposits 89
Accounts receivable 6
Escrows for taxes and insurance 135
Restricted escrows 248
Other assets 176
Investment properties:
Land $ 1,072
Buildings and related personal property 11,670
12,742
Less accumulated depreciation (6,247) 6,495
$7,610
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 25
Tenant security deposits 89
Accrued taxes 228
Other liabilities 111
Due to affiliates 321
Mortgage notes payable 8,514
Partners' Deficit
General partners $ (105)
Limited partners (751.59 units
issued and outstanding) (1,573) (1,678)
$ 7,610
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)
Three Months Ended
March 31,
1997 1996
Revenues:
Rental income $ 688 $ 679
Other income 49 54
Total revenues 737 733
Expenses:
Operating 227 223
General and administrative 29 31
Maintenance 64 78
Depreciation 136 128
Interest 215 218
Property taxes 63 62
Total expenses 734 740
Net income (loss) $ 3 $ (7)
Net income (loss) allocated
to general partners (5%) $ -- $ --
Net income (loss) allocated
to limited partners (95%) 3 (7)
$ 3 $ (7)
Net income (loss) per limited
partnership unit $ 3.79 $(8.71)
See Accompanying Notes to Consolidated Financial Statements
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) (190) (200)
Net income for the three months
ended March 31, 1997 -- -- 3 3
Partners' deficit at
March 31, 1997 751.59 $ (105) $(1,573) $(1,678)
<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)
Three Months Ended
March 31,
1997 1996
Cash flows from operating activities:
Net income (loss) $ 3 $ (7)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 136 128
Amortization of discounts and loan costs 16 15
Change in accounts:
Restricted cash 2 (6)
Accounts receivable 5 6
Escrows for taxes and insurance 2 (5)
Other assets 16 15
Accounts payable (20) (21)
Tenant security deposit liabilities (2) 6
Accrued taxes (13) (8)
Other liabilities (26) 14
Net cash provided by operating
activities 119 137
Cash flows from investing activities:
Property improvements and replacements (48) (34)
Deposits to restricted escrows (19) (21)
Net cash used in investing activities (67) (55)
Cash flows from financing activities:
Payments on mortgage notes payable (28) (25)
Distributions to partners (200) (253)
Net cash used in financing activities (228) (278)
Net decrease in cash and cash equivalents (176) (196)
Cash and cash equivalents at beginning of period 637 868
Cash and cash equivalents at end of period $ 461 $ 672
Supplemental disclosure of cash flow information:
Cash paid for interest $ 200 $ 203
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 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 month period ended March 31, 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.
Certain reclassifications have been made to the 1996 information to conform
to the 1997 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
$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 three months ended March 31, 1997 and 1996
(in thousands):
1997 1996
Property management fees $ 37 $ 37
Reimbursement for services of affiliates 19 21
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
three months ended March 31, 1997 and 1996:
Average
Occupancy
1997 1996
Ashley Woods Apartments
Cincinnati, Ohio 87% 91%
Versailles on the Lake Apartments
Fort Wayne, Indiana 96% 92%
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 the local market. The increase in occupancy at Versailles is due to the
property's improved appearance after common area improvements in 1995 and 1996
and aggressive leasing efforts focused on improving occupancy percentages.
The Partnership realized net income of $3,000 for the three months ended
March 31, 1997, compared to a net loss of $7,000 for the three months ended
March 31, 1996. The increase in net income is primarily due to decreased
maintenance expenses at Ashley Woods where snow removal and grounds maintenance
costs decreased. In addition, rental revenues increased due to increases in
rental rates at both properties and increased occupancy at Versailles. Included
in maintenance expense for 1997 is $3,000 of major repairs and maintenance
comprised of exterior building repairs and window coverings. For 1996,
maintenance expense includes $8,000 of major repairs and maintenance comprised
of tennis court repairs, window coverings and exterior building renovations.
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, 1997, the Partnership held unrestricted cash of $461,000
compared to $672,000 at March 31, 1996. Net cash provided by operations
decreased primarily due to the payment of audit and professional fees during the
first quarter of 1997. Net cash used in investing activities increased due to
increased property improvements. 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 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 $8,514,000, net of discount, is amortized over varying periods.
Of this amount, $5,967,000, which matures in 2000, relates to Ashley Woods and
$2,547,000, 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 $200,000 and $253,000 were made during the first
quarters of 1997 and 1996, 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, 1997.
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 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Davidson
Diversified Real Estate I, L.P. 1997 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, L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 461
<SECURITIES> 0
<RECEIVABLES> 6
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 12,742
<DEPRECIATION> 6,247
<TOTAL-ASSETS> 7,610
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 8,514
0
0
<COMMON> 0
<OTHER-SE> (1,678)
<TOTAL-LIABILITY-AND-EQUITY> 7,610
<SALES> 0
<TOTAL-REVENUES> 737
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 734
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 215
<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>
