FORM 10-QSB--QUARTERLY OR TRANSITIONAL 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, 2000
[ ] 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 (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, 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___
<PAGE>
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, 2000
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 357
Receivables and deposits 100
Restricted escrows 195
Other assets 180
Investment properties:
Land $ 1,072
Buildings and related personal property 13,548
14,620
Less accumulated depreciation (8,236) 6,384
$ 7,216
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 32
Tenant security deposit liabilities 76
Accrued property taxes 176
Other liabilities 136
Due to affiliate 321
Mortgage notes payable 10,140
Partners' Deficit
General partners $ (141)
Limited partners (751.59 units issued and
outstanding) (3,524) (3,665)
$ 7,216
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
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,
2000 1999 2000 1999
Revenues:
<S> <C> <C> <C> <C>
Rental income $ 799 $ 744 $ 1,586 $ 1,442
Other income 82 77 142 139
Total revenues 881 821 1,728 1,581
Expenses:
Operating 326 354 694 690
General and administrative 41 28 74 63
Depreciation 182 164 359 315
Interest 204 210 408 416
Property taxes 63 66 130 132
Total expenses 816 822 1,665 1,616
Net income (loss) $ 65 $ (1) $ 63 $ (35)
Net income (loss) allocated to general
partners (5%) 3 -- 3 (2)
Net income (loss) allocated to limited
partners (95%) 62 (1) 60 (33)
$ 65 $ (1) $ 63 $ (35)
Net income (loss) per limited partnership
unit 82.49 (1.33) 79.83 (43.91)
Distributions per limited partnership
unit $546.84 $ -- $546.84 $ --
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
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, 1999 751.59 $ (125) $(3,173) $(3,298)
Distributions to partners -- (19) (411) (430)
Net income for the six months
ended June 30, 2000 -- 3 60 63
Partners' deficit at
June 30, 2000 751.59 $ (141) $(3,524) $(3,665)
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
d)
Davidson Diversified Real Estate I, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ 63 $ (35)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 359 315
Amortization of discounts and loan costs 28 32
Change in accounts:
Receivables and deposits 102 73
Other assets (20) (41)
Accounts payable (28) (8)
Tenant security deposit liabilities 8 (1)
Accrued property taxes (83) (83)
Other liabilities 44 (15)
Net cash provided by operating activities 473 237
Cash flows from investing activities:
Property improvements and replacements (295) (190)
Net receipts from restricted escrows 8 613
Net cash (used in) provided by investing
activities (287) 423
Cash flows from financing activities:
Payments on mortgage notes payable (80) (82)
Distributions to partners (430) --
Net cash used in financing activities (510) (82)
Net (decrease) increase in cash and cash equivalents (324) 578
Cash and cash equivalents at beginning of period 681 338
Cash and cash equivalents at end of period $ 357 $ 916
Supplemental disclosure of cash flow information:
Cash paid for interest $ 333 $ 384
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
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" or "Registrant") 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,
2000, are not necessarily indicative of the results that may be expected for the
year ending December 31, 2000. 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, 1999.
Principles of Consolidation
The consolidated financial statements include the Partnership's 100% membership
interest in Ashley Woods L.L.C. As a result, the Partnership consolidates its
interest in Ashley Woods, whereby all accounts of Ashley Woods are included in
the consolidated financial statements of the Partnership with inter-entity
accounts being eliminated.
Note B - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust, with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in
the Managing General Partner. The Managing General Partner does not believe that
this transaction has had or will have a material effect on the affairs and
operations of the Partnership.
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. Affiliates of the Managing General Partner provide
property management services to the Partnership. 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 payments were paid to affiliates of the Managing General Partner
during each of the six month periods ended June 30, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in operating
expenses) $ 88 $ 81
Reimbursement for services of affiliates (included
in investment properties and general and
administrative expenses) 36 41
During the six months ended June 30, 2000 and 1999, affiliates of the Managing
General Partner were entitled to receive 5% of gross receipts from both of the
Registrant's properties as compensation for providing property management
services. The Registrant paid to such affiliates approximately $88,000 and
$81,000 for the six month periods ended June 30, 2000 and 1999, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $36,000 and
$41,000 for the six month periods ended June 30, 2000 and 1999, respectively.
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. The total amount of $321,000 is included on the consolidated balance
sheet as "Due to affiliate". Payment of the commissions will not be made to the
affiliated company until each limited partner has received distributions equal
to 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.
AIMCO and its affiliates currently own 270.9 limited partnership units in the
Partnership representing 36.04% of the outstanding units. A number of these
units were acquired pursuant to tender offers made by AIMCO or its affiliates.
It is possible that AIMCO or its affiliates will make one or more additional
offers to acquire additional limited partnership interests in the Partnership
for cash or in exchange for units in the operating partnership of AIMCO. Under
the Partnership Agreement, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the Managing General Partner because of their
affiliation with the Managing General Partner.
On September 26, 1997, an affiliate of the Managing General Partner purchased
Lehman Brothers' class "D" subordinated bonds of SASCO, 1992-M1. These bonds are
secured by 55 multi-family apartment mortgage loan pairs held in trust,
including Versailles on the Lake Apartments which is owned by the Partnership.
<PAGE>
Note D - Distributions
During the six months ended June 30, 2000 the Partnership paid distributions of
approximately $430,000 (approximately $411,000 to the limited partners or
$546.84 per limited partnership unit) of which approximately $49,000 ($65.19 per
limited partnership unit) represented a portion of the previously undistributed
net proceeds from the mortgage refinancing of Ashley Woods during 1997 which was
paid entirely to the limited partners and approximately $381,000 (approximately
$362,000 to the limited partners or $481.65 per limited partnership unit) was
paid from operations. During the six months ended June 30, 1999, the Partnership
did not pay any distributions to its partners. Distributions may be restricted
by the requirements to deposit net operating income (as defined in the mortgage
note) into the Reserve Account until the Reserve Account is funded in an amount
equal to $400 to $1,000 per apartment unit for Versailles on the Lake Apartments
for a total of $62,400 to $156,000. As of June 30, 2000 the Partnership had
deposits of approximately $109,000 in the Reserve Account.
Note E - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenues: The Partnership has one reportable segment:
residential properties. The Partnership's residential property segment consists
of two apartment complexes, one located in Cincinnati, Ohio, and the other
located in Fort Wayne, Indiana. The Partnership rents apartment units to tenants
for terms that are typically twelve months or less.
Measurement of segment profit or loss: The Partnership evaluates performance
based on segment profit (loss) before depreciation. The accounting policies of
the reportable segment are the same as those of the Partnership as described in
the Partnership's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1999.
Factors management used to identify the enterprise's reportable segments: The
Partnership's reportable segment consists of investment properties that offer
similar products and services. Although each of the investment properties is
managed separately, they have been aggregated into one segment as they provide
services with similar types of products and customers.
Segment information for the three and six month periods ended June 30, 2000 and
1999 is shown in the tables below (in thousands). The "Other" column includes
Partnership administration related items and income and expense not allocated to
the reportable segment.
<TABLE>
<CAPTION>
Six months ended June 30, 2000 Residential Other Totals
<S> <C> <C> <C>
Rental income $ 1,586 $ -- $ 1,586
Other income 138 4 142
Interest expense 408 -- 408
Depreciation 359 -- 359
General and administrative expense -- 74 74
Segment profit (loss) 133 (70) 63
Total assets 7,100 116 7,216
Capital expenditures for investment
properties 295 -- 295
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three months ended June 30, 2000 Residential Other Totals
<S> <C> <C> <C>
Rental income $ 799 $ -- $ 799
Other income 80 2 82
Interest expense 204 -- 204
Depreciation 182 -- 182
General and administrative expense -- 41 41
Segment profit (loss) 104 (39) 65
</TABLE>
<TABLE>
<CAPTION>
Six months ended June 30, 1999 Residential Other Totals
<S> <C> <C> <C>
Rental income $ 1,442 $ -- $ 1,442
Other income 134 5 139
Interest expense 416 -- 416
Depreciation 315 -- 315
General and administrative expense -- 63 63
Segment profit (loss) 23 (58) (35)
Total assets 7,770 276 8,046
Capital expenditures for investment
properties 190 -- 190
</TABLE>
<TABLE>
<CAPTION>
Three months ended June 30, 1999 Residential Other Totals
<S> <C> <C> <C>
Rental income $ 744 $ -- $ 744
Other income 75 2 77
Interest expense 210 -- 210
Depreciation 164 -- 164
General and administrative expense -- 28 28
Segment profit (loss) 25 (26) (1)
</TABLE>
Note F - Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, its Managing General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the Managing General Partner filed a motion seeking dismissal of the
action. In lieu of responding to the motion, the plaintiffs have filed an
amended complaint. The Managing General Partner filed demurrers to the amended
complaint which were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to final court approval, on behalf of the Partnership
and all limited partners who owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the Managing General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case. The Court will entertain applications for lead
counsel which must be filed by August 4, 2000. The Court has scheduled a hearing
on August 21, 2000 to address the issue of appointing lead counsel. The Managing
General Partner does not anticipate that costs associated with this case will be
material to the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and other filings with the Securities
and Exchange Commission made by the Registrant from time to time. The discussion
of the Registrant's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Registrant's business and results of
operation. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
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, 2000 and 1999:
Average Occupancy
2000 1999
Ashley Woods Apartments
Cincinnati, Ohio 94% 93%
Versailles on the Lake Apartments
Fort Wayne, Indiana 97% 90%
The Managing General Partner attributes the increase in occupancy at Versailles
on the Lake Apartments to increased marketing and advertising efforts to attract
new tenants.
Results of Operations
The Partnership realized net income of approximately $63,000 for the six months
ended June 30, 2000 compared to a net loss of approximately $35,000 for the six
months ended June 30, 1999. The Partnership realized net income of approximately
$65,000 for the three month period ended June 30, 2000 compared to a net loss of
approximately $1,000 for the three month period ended June 30, 1999. The
increase in net income for the six months ended June 30, 2000 is primarily due
to an increase in total revenues which was partially offset by an increase in
total expenses. The increase in net income for the three month period ended June
30, 2000 is primarily due to an increase in total revenues and a slight decrease
in total expenses. Total revenues increased for the three and six month periods
ended June 30, 2000 primarily due to an increase in rental income and other
income. Rental income increased for the three and six month periods primarily
due to increased occupancy and increased average annual rental rates as well as
decreased concessions at both of the Partnership's properties for the six months
ended June 30, 2000. Other income increased for the three and six month periods
due to an increase in interest income due to an increase in the average cash
balances held in interest-bearing accounts.
Total expenses increased for the six month period ended June 30, 2000 due
primarily to increased depreciation expense and general and administrative
expenses. Total expenses decreased for the three month period ended June 30,
2000 due primarily to decreased operating expenses which was partially offset by
increased depreciation expense and general and administrative expenses.
Depreciation expense increased for the three and six month periods due to
property improvements and replacements completed during the past twelve months
that are now being depreciated. General and administrative expenses increased
for the three and six month periods due primarily to an increase in professional
fees associated with the administration of the Partnership. Included in general
and administrative expenses at both June 30, 2000 and 1999, are reimbursements
to the Managing General Partner allowed under the Partnership Agreement
associated with its management of the Partnership. Costs associated with the
quarterly and annual communications with investors and regulatory agencies and
the annual audit required by the Partnership Agreement are also included.
Operating expenses decreased for the three month period ended June 30, 2000
primarily due to a decrease in repairs and maintenance expense at Ashley Woods.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of both 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.
Liquidity and Capital Resources
At June 30, 2000, the Partnership had cash and cash equivalents of approximately
$357,000 compared to approximately $916,000 at June 30, 1999. The decrease in
cash and cash equivalents of approximately $324,000 since the Partnership's year
ended December 31, 1999 is due to approximately $287,000 of cash used in
investing activities and approximately $510,000 of cash used in financing
activities which was partially offset by approximately $473,000 of cash provided
by operating activities. Cash used in investing activities consisted of property
improvements and replacements slightly offset by net receipts from escrow
accounts maintained by the mortgage lenders. Cash used in financing activities
consisted of distributions to partners, and to a lesser extent, payments of
principal made on the mortgages encumbering the Registrant's properties. The
Partnership invests its working capital reserves in money market accounts.
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 properties to adequately maintain the physical
assets and other operating needs of the Registrant and to comply with Federal,
state, and local legal and regulatory requirements. Capital improvements planned
for each of the Registrant's properties are detailed below:
Ashley Woods
During the six months ended June 30, 2000, the Partnership completed
approximately $238,000 of capital improvements at the property, consisting
primarily of electrical upgrades, cabinets, structural improvements, carpet
replacement, and appliances. These improvements were funded from the
Partnership's operating cash flow and reserves. The Partnership evaluated the
capital improvement needs of the property for the year 2000. The amount budgeted
is approximately $251,000, consisting primarily of electrical upgrades, air
conditioning unit replacement, appliances, carpet replacements, and structural
improvements. Additional improvements may be considered and will depend on the
physical condition of the property as well as replacement reserves and
anticipated cash flow generated by the property.
<PAGE>
Versailles on the Lake
During the six months ended June 30, 2000, the Partnership completed
approximately $57,000 of capital improvements at the property, consisting
primarily of carpet and vinyl replacement, appliances, and structural
improvements. These improvements were funded from the Partnership's operating
cash flow. The Partnership evaluated the capital improvement needs of the
property for the year 2000. The amount budgeted is approximately $163,000,
consisting primarily of appliances, carpet replacements, exterior painting,
parking lot improvements, and structural improvements. Additional improvements
may be considered and will depend on the physical condition of the property as
well as replacement reserves and anticipated cash flow generated by the
property.
The capital expenditures will be incurred only if cash is available from
operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Registrant's distributable cash flow, if
any, may be adversely affected at least in the short term.
The Registrant's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Registrant. The mortgage
indebtedness of approximately $10,140,000, net of discount, is amortized over
periods ranging from 21 to 30 years with balloon payments due in 2002 and 2004.
The Managing General Partner will attempt to refinance such indebtedness and/or
sell the properties prior to such maturity dates. If the properties cannot be
refinanced or sold for a sufficient amount, the Registrant will risk losing such
properties through foreclosure.
During the six months ended June 30, 2000 the Partnership paid distributions of
approximately $430,000 (approximately $411,000 to the limited partners or
$546.84 per limited partnership unit) of which approximately $49,000 ($65.19 per
limited partnership unit) represented a portion of the previously undistributed
net proceeds from the mortgage refinancing of Ashley Woods during 1997 which was
paid entirely to the limited partners and approximately $381,000 (approximately
$362,000 to the limited partners or $481.65 per limited partnership unit) was
paid from operations. During the six months ended June 30, 1999, the Partnership
did not pay any distributions to its partners. Future cash distributions will
depend on the levels of net cash generated from operations, the availability of
cash reserves and the timing of debt maturities, refinancings, and/or property
sales. The Partnership's distribution policy is reviewed on a semi-annual basis.
There can be no assurance, however, that the Partnership will generate
sufficient funds from operations after required capital improvements to permit
additional distributions to its partners during the remainder of 2000 or
subsequent periods. Distributions may be restricted by the requirements to
deposit net operating income (as defined in the mortgage note) into the Reserve
Account until the Reserve Account is funded in an amount equal to $400 to $1,000
per apartment unit for Versailles on the Lake Apartments for a total of $62,400
to $156,000. As of June 30, 2000 the Partnership had deposits of approximately
$109,000 in the Reserve Account.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, its Managing General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the Managing General Partner filed a motion seeking dismissal of the
action. In lieu of responding to the motion, the plaintiffs have filed an
amended complaint. The Managing General Partner filed demurrers to the amended
complaint which were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to final court approval, on behalf of the Partnership
and all limited partners who owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the Managing General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case. The Court will entertain applications for lead
counsel which must be filed by August 4, 2000. The Court has scheduled a hearing
on August 21, 2000 to address the issue of appointing lead counsel. The Managing
General Partner does not anticipate that costs associated with this case will be
material to the Partnership's overall operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
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, 2000.
<PAGE>
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, L.P.
By: Davidson Diversified Properties, Inc.
Its Managing General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date:
