<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For Quarter Ended September 30, 1996
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Commission file number 0-13563
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DAMSON/BIRTCHER REALTY INCOME FUND - I
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(Exact name of registrant as specified in its charter)
Pennsylvania 13-3264491
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
27611 La Paz Road, P.O. Box A-1, Laguna Niguel, California 92677-0100
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(Address of principal executive offices) (Zip Code)
(714) 643-7700
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 12(g), 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding twelve 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
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DAMSON/BIRTCHER REALTY INCOME FUND-I
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
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INDEX
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<TABLE>
<CAPTION>
Page
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets -
September 30, 1996 (Unaudited) and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Operations (Unaudited) -
Three and Nine Months Ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Cash Flows (Unaudited) -
Nine Months Ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Financial Statements (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
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DAMSON/BIRTCHER REALTY INCOME FUND-I
BALANCE SHEETS
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<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
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(Unaudited) (Note)
<S> <C> <C>
ASSETS
- ------
Properties held for sale (net of valuation $37,033,000 $36,996,000
allowance of $6,640,000 in 1996 and
$4,770,000 in 1995)
Cash and cash equivalents 215,000 301,000
Accounts receivable (net of allowance for
doubtful accounts of $46,000 in 1996 and
$63,000 in 1995) 39,000 43,000
Accrued rent receivable 487,000 443,000
Prepaid expenses and other assets 706,000 710,000
----------- -----------
$38,480,000 $38,493,000
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Accounts payable and accrued liabilities $ 932,000 $ 1,153,000
Secured loan(s) payable 3,679,000 3,116,000
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Total liabilities 4,611,000 4,269,000
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Partners' capital (deficit):
Limited Partners 34,363,000 34,714,000
General Partner (494,000) (490,000)
----------- -----------
33,869,000 34,224,000
Commitments and contingencies - -
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$38,480,000 $38,493,000
=========== ===========
</TABLE>
Note: The balance sheet at December 31, 1995 has been prepared from the
audited financial statements as of that date.
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
DAMSON/BIRTCHER REALTY INCOME FUND-I
STATEMENTS OF OPERATIONS
(UNAUDITED)
------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES
- --------
Rental income $1,590,000 $1,442,000 $4,737,000 $4,411,000
Interest income 4,000 12,000 6,000 33,000
---------- ---------- ---------- ----------
Total revenues 1,594,000 1,454,000 4,743,000 4,444,000
---------- ---------- ---------- ----------
EXPENSES
- --------
Operating expenses 429,000 475,000 1,318,000 1,338,000
Real estate taxes 230,000 257,000 568,000 709,000
Depreciation and amortization 56,000 505,000 140,000 1,510,000
General and administrative 230,000 243,000 708,000 728,000
Interest 84,000 72,000 240,000 218,000
Adjustment to carrying value
of real estate 335,000 - 1,870,000 -
---------- ---------- ---------- ----------
Total expenses 1,364,000 1,552,000 4,844,000 4,503,000
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ 230,000 $ ( 98,000) $ (101,000) $ (59,000)
========== ========== ========== ==========
NET INCOME (LOSS) ALLOCABLE TO:
General Partner $ 2,000 $ (1,000) $ (1,000) $ ( 1,000)
========== ========== ========== ==========
Limited Partners $ 228,000 $ (97,000) $ (100,000) $ (58,000)
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
DAMSON/BIRTCHER REALTY INCOME FUND-I
STATEMENTS OF CASH FLOWS
(UNAUDITED)
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<TABLE>
<CAPTION>
Nine Months Ended September 30,
-----------------------------------
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net loss $ (101,000) $ (59,000)
Adjustments to reconcile net loss to
net cash (used in) provided by operating
activities:
Depreciation and amortization 140,000 1,510,000
Adjustment to carrying value of real estate 1,870,000 -
Changes in:
Additions to properties held for sale (1,907,000) -
Accounts receivable 4,000 51,000
Accrued rent receivable (44,000) (26,000)
Prepaid expenses and other assets (135,000) (106,000)
Accounts payable and accrued liabilities (221,000) 95,000
----------- ----------
Net cash (used in) provided by operating
activities (394,000) 1,465,000
Cash flows from investing activities:
Investments in real estate - (514,000)
----------- ----------
Net cash used in investing activities - (514,000)
Cash flows from financing activities:
Proceeds from secured loan 700,000 -
Secured loan payments (137,000) (125,000)
Distributions (255,000) (766,000)
----------- ----------
Net cash provided by (used in) financing
activities 308,000 (891,000)
Net (decrease) increase in cash and cash
equivalents (86,000) 60,000
Cash and cash equivalents, beginning of
period 301,000 648,000
----------- ----------
Cash and cash equivalents, end of period $ 215,000 $ 708,000
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
DAMSON/BIRTCHER REALTY INCOME FUND-I
NOTES TO FINANCIAL STATEMENTS - UNAUDITED
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(1) Accounting Policies
-------------------
The financial statements of Damson/Birtcher Realty Income Fund-I (the
"Partnership") included herein have been prepared by the General
Partner, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. These financial statements
include all adjustments which are of a normal recurring nature and, in
the opinion of the General Partner, are necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted,
pursuant to the rules and regulations of the Securities and Exchange
Commission. These financial statements should be read in conjunction
with the financial statements and notes thereto included in the
Partnership's annual report on Form 10-K for the year ended December
31, 1995.
Earnings Per Unit
The Partnership Agreement does not designate investment interests in
units. All investment interests are calculated on a "percent of
Partnership" basis, in part to accommodate original reduced rates on
sales commissions for subscriptions in excess of certain specified
amounts.
A Limited Partner who was charged a reduced sales commission or no
sales commission was credited with proportionately larger Invested
Capital and therefore had a disproportionately greater interest in the
capital and revenues of the Partnership than a Limited Partner who
paid commissions at a higher rate. As a result, the Partnership has
no set unit value as all accounting, investor reporting and tax
information is based upon each investor's relative percentage of
Invested Capital. Accordingly, earnings or loss per unit is not
presented in the accompanying financial statements.
Carrying Value of Real Estate
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121 "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," ("FAS 121"). This Statement requires that if the
General Partner believes factors are present that may indicate
long-lived assets are impaired, the undiscounted cash flows, before
debt service, related to the assets should be estimated. If these
estimated cash flows are less than the carrying value of the asset,
then impairment is deemed to exist. If impairment exists, the asset
should be written down to the estimated fair value.
6
<PAGE> 7
DAMSON/BIRTCHER REALTY INCOME FUND-I
NOTES TO FINANCIAL STATEMENTS - UNAUDITED (Cont'd.)
- -----------------------------------------
(1) Accounting Policies (Cont'd.)
-------------------
Further, assets held for sale, including any unrecoverable accrued
rent receivable or capitalized leasing commissions, should be carried
at the lower of carrying value or fair value less estimated selling
costs. Any adjustment to carrying value is recorded as a valuation
allowance against property held for sale. Each reporting period, the
General Partner will review its estimates of fair value, which may be
decreased or increased up to the original carrying value. Finally,
assets held for sale are no longer depreciated. The General Partner
adopted FAS 121 at December 31, 1995 and the adoption did not have a
material impact on the Partnership's operations or financial position,
as prior to December 31, 1995, the Partnership had not had any
properties held for sale.
As noted above, as of December 31, 1995 the General Partner decided to
account for the Partnership's properties as assets held for sale,
instead of for investment. Assuming an average 12 month holding
period, the General Partner compared the carrying value of each
property to its appraised value as of January 1, 1996. If the
carrying value of a property and certain related assets was greater
than its appraised value, less selling costs, the General Partner
reduced the carrying value of the property by the difference. Using
this methodology, as of December 31, 1995, the General Partner
determined that The Cornerstone, Ladera I Shopping Center,
Terracentre, Arlington Executive Plaza and Washington Technical Center
had carrying values greater than their appraised values, and
accordingly reduced those carrying values by $1,600,000, $560,000,
$590,000, $1,250,000 and $770,000 to $9,032,000, $6,234,000,
$2,397,000, $2,740,000 and $2,612,000, respectively.
For the three and nine months ended September 30, 1996, the
Partnership spent an aggregate of approximately $335,000 and
$1,870,000, respectively, related to tenant/building improvements and
leasing commissions with respect to the aforementioned properties.
Because these expenditures exceeded the estimate of fair value of each
of those properties as of December 31, 1995, the General Partner
adjusted the carrying value of the Partnership's portfolio by an
aggregate of $1,870,000 for the nine months ending September 30, 1996.
(2) Transactions with Affiliates
----------------------------
The Partnership has no employees and, accordingly, the General Partner
and its affiliates perform services on behalf of the Partnership in
connection with administering the affairs of the Partnership. The
General Partner and affiliates are reimbursed for their general and
administrative costs actually incurred and associated with services
performed on behalf of the Partnership. For the three months ended
September 30, 1996 and 1995, the Partnership incurred approximately
$49,000 and $49,000, respectively, of such expenses. For the nine
months ended September 30, 1996 and 1995, such payments were $147,000
and $157,000 respectively.
7
<PAGE> 8
DAMSON/BIRTCHER REALTY INCOME FUND-I
NOTES TO FINANCIAL STATEMENT - UNAUDITED (Cont'd.)
----------------------------------------
(2) Transactions with Affiliates (Cont'd.)
----------------------------
An affiliate of the General Partner provides property management
services with respect to the Partnership's properties and receives a
fee for such services not to exceed 3% of the gross receipts from the
properties under management. Such fees amounted to approximately
$46,000 and $39,000 for the three months ended September 30, 1996 and
1995, respectively, and $135,000 and $116,000 for the nine months
ended September 30, 1996 and 1995. In addition, an affiliate of the
General Partner received $89,000 and $79,000 for the three months
ended September 30, 1996 and 1995, respectively, as reimbursement of
costs of on-site property management personnel and other reimbursable
costs. For the nine months ended September 30, 1996 and 1995, such
payments were $284,000 and $243,000, respectively.
As previously reported, on June 24, 1993, the Partnership completed
its solicitation of written consent from its Limited Partners. A
majority in interest of the Partnership's Limited Partners approved
each of the proposals contained in the Information Statement dated May
5, 1993. Those proposals have been implemented by the Partnership as
contemplated by the Information Statement as amendments to the
Partnership Agreement, and are reflected in these financial statements
as such.
The Amended Partnership Agreement provides for the Partnership's
payment to the General Partner of an annual asset management fee equal
to .75% of the aggregate appraised value of the Partnership's
properties as determined by independent appraisal undertaken in
January of each year. Such fees for the three months ended September
30, 1996 and 1995, amounted to $76,000 and $76,000, respectively. For
the nine months there ended, such fees amounted to $227,000 and
$228,000, respectively.
In addition, the Amended Partnership Agreement provides for payment to
the General Partner of a leasing fee for services rendered in
connection with leasing space in a Partnership property after the
expiration or termination of leases. Fees for leasing services for
the three months ended September 30, 1996 and 1995, amounted to $5,000
and $21,000, respectively, and for the nine months there ended they
amounted to $13,000 and $28,000, respectively.
(3) Commitments and Contingencies
-----------------------------
Litigation
The Partnership is not a party to any material pending legal
proceedings other than ordinary routine litigation incidental to its
business. It is the General Partner's belief that the outcome of
these proceedings will not be material to the business or financial
condition of the Partnership.
8
<PAGE> 9
DAMSON/BIRTCHER REALTY INCOME FUND-I
NOTES TO FINANCIAL STATEMENT - UNAUDITED (Cont'd.)
- ----------------------------------------
(4) Subsequent Events
-----------------
In August 1996, the General Partner entered into a contract to sell
Arlington Executive Plaza for $3,041,250. The property is currently
in escrow and is scheduled to close on or before November 30, 1996.
Proceeds from the sale will be used to retire the existing debt on
Ladera-I Shopping Center (approximately $700,000) with any remainder
being distributed to the Limited Partners.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
-------------------------------
Since completion of its acquisition program in September 1985, the
Partnership has been engaged primarily in the operation of its
properties. The Partnership's objective has been to hold its
properties as long-term investments, although properties may be sold
at any time depending upon the General Partner's judgment of the
anticipated remaining economic benefits of continued ownership.
Working capital is and will be provided principally from the operation
of the Partnership's properties and the working capital reserve
established for the properties. The Partnership may incur mortgage
indebtedness relating to such properties by borrowing funds primarily
to fund capital improvements or to obtain financing proceeds for
distribution to the partners.
On July 30, 1993, the Partnership obtained a loan secured by a First
Deed of Trust on the Certified Distribution Center in Salt Lake City,
Utah. The loan, in the amount of $3,500,000, carries a fixed interest
rate of 9% per annum over a 13-year fully amortizing term. The
Partnership's first payment of $38,138.82 was paid on September 1,
1993, with monthly installments due thereafter. Proceeds from that
loan, along with $500,000 of Partnership cash reserves, were used to
retire the Partnership's then existing debt of $4,000,000.
In March 1996, the Partnership entered into a loan agreement pursuant
to which it may borrow up to $1,500,000, evidenced by a note secured
by a first deed of trust and financing statement on the Ladera-I
Shopping Center in Albuquerque, New Mexico. Pursuant to the note and
loan agreement, until March 3, 1997 the Partnership is to pay interest
only at the rate of 1% over prime (currently, the loan rate is 9.25%)
on the amounts it borrows. Thereafter, the outstanding balance of all
advances made under the note is to be converted to a fully amortizing
loan payable in 24 equal monthly payments of principal plus accrued
interest, commencing April 3, 1997. The Partnership has agreed to
repay the loan from the first sale of the Partnership's property. The
net proceeds of the foregoing loan are to be used to fund a portion of
the renovation and tenant improvements at The Cornerstone and tenant
improvements at Oakpointe, with any remainder added to the
Partnership's working capital reserves. As of September 30, 1996,
the Partnership had borrowed
9
<PAGE> 10
DAMSON/BIRTCHER REALTY INCOME FUND-I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont'd.)
Liquidity and Capital Resources (Cont'd.)
-------------------------------
$700,000 pursuant to the aforementioned loan agreement to fund a
portion of the renovation at the Cornerstone Shopping Center, which
was completed during the second quarter of 1996. There will be
additional costs for tenant improvements as the vacant space in the
center is leased.
Certain of the Partnership's properties are not fully leased. The
Partnership is actively marketing the vacant space in these
properties, subject to the competitive environment in each of their
respective market areas. To the extent the Partnership is not
successful in maintaining or increasing occupancy levels at these
properties, the Partnership's future cash flow may be reduced.
Distributions through September 30, 1996 represent cash flow generated
from operations of the Partnership's properties and interest earned on
the temporary investment of working capital net of capital reserve
requirements. Future cash distributions will be made principally to
the extent of cash flow attributable to operations and sales of the
Partnership's properties and interest earned on the investment of
capital reserves, after loan repayments, capital improvements and
providing for future capital reserves.
In accordance with the terms of the Partnership Agreement, each year
the Partnership secures an independent appraisal of each of the
Partnership's properties as of January 1. Prior to the January 1,
1995 appraisals, the independent appraiser had estimated each
property's "Investment Value," utilizing a seven to ten-year cash flow
model to estimate value based upon an income approach.
The Amendment to the Partnership Agreement consented to by the Limited
Partners in June 1993 mandated, among other things, that the General
Partner seek a vote of (and provide an analysis and recommendation to)
the Limited Partners no later than December 31, 1996 regarding the
prompt liquidation of the Partnership in the event that properties
with (then) current appraised values (constituting at least one-half
of the total (then) current appraised values) of all of the
Partnership's properties are not sold or under contract for sale by
the end of 1996.
Given that mandate, the General Partner requested that the appraiser
provide an assessment of value that reflects a shorter investment
holding term. Although the General Partner does not currently have a
specific liquidation plan for the Partnership's properties, it
requested that the appraiser assume that the entire portfolio would
be sold over four years, in connection with the January 1995
appraisals and over three years in connection with the January 1996
appraisals.
10
<PAGE> 11
DAMSON/BIRTCHER REALTY INCOME FUND-I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont'd.)
Liquidity and Capital Resources (Cont'd.)
-------------------------------
Using the shorter-term investment methodology that is consistent with
the mandate of the 1993 Amendment to the Partnership Agreement, the
appraiser estimated the value of the Partnership's properties at
January 1, 1996 to be $40,390,000, or $4,155 per $10,000 original
investor subscription.
Over the past year, the General Partner has examined several
alternative methods to achieve the Partnership's goal of selling
properties and liquidating the Partnership at the earliest practicable
time consistent with achieving reasonable value for the Limited
Partners' investment. As explained in the Partnership's May 5, 1993
Information Statement, "achieving reasonable value" has meant for
the Partnership to balance receiving higher sales prices per
property than their 1993 values while at the same time not waiting
forever to sell at a theoretical "top of the market." Alternatives
under consideration by the General Partner may include a property-
by-property liquidation or selling all of the properties as a single
portfolio. The General Partner has had preliminary discussions
regarding disposition, in whole or in part, of the Partnership's
properties with various potential purchasers of some or all of the
Partnership's portfolio.
In connection with its consideration of these alternatives, the
General Partner has decided to treat its properties as held for sale,
instead of for investment, for financial statement purposes. In
accordance with Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," the carrying value of these properties was
evaluated to ensure that each property was carried on the
Partnership's Balance Sheet at the lower of cost or fair value less
estimated selling costs. The General Partner estimated fair value for
this purpose based on appraisals performed as of January 1, 1996.
However, fair value can only be determined based upon sales to third
parties and sales proceeds could differ substantially.
Based upon the General Partner's survey of the current marketplace,
the General Partner believes, in fact, that in the relatively short
term the Partnership's properties could generate sales prices that, in
the aggregate, could be materially less than their aggregate appraised
values based upon an "Investment Value" appraisal model. The amount
of the possible variance between the aggregate appraised values and
potential sales prices cannot be reliably estimated at this time,
because of the numerous variables that could affect the sales prices,
including but not limited to the time frame in which the properties
must be sold, method of sale (property-by-property or single
transaction), prevailing capitalization rates at which comparable
properties are being sold at the time of the Partnership's sales,
constantly changing local market conditions and the state of leasing
negotiations and capital expenditures for the properties at the time
of sale.
11
<PAGE> 12
DAMSON/BIRTCHER REALTY INCOME FUND-I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont'd.)
Results of Operations for the Three Months Ended September 30, 1996
-------------------------------------------------------------------
Compared With the Three Months Ended September 30, 1995 and for the
-------------------------------------------------------------------
Nine Months Ended September 30, 1996 Compared With the Nine Months
------------------------------------------------------------------
Ended September 30, 1995
------------------------
The increases in rental income for the three and nine months ended
September 30, 1996, as compared to the corresponding periods in 1995,
were primarily attributable to the increase's in revenue at Oakpointe,
Terracentre and Arlington Executive Plaza. At Oakpointe, a new lease
was successfully negotiated with Symbol Technologies, Inc,
encompassing 22,801 square feet, for a five year term effective in
February 1996. In addition, a new lease was negotiated at Terracentre
with Ragland Design Group, Inc., in July 1996, encompassing 1,194
square feet for a three year term. At Arlington Executive Plaza, new
leases were successfully negotiated with Dawes Laboratories
encompassing 4,832 square feet in October 1995, Drs. Jessen, Wesley &
Assoc., encompassing 1,620 square feet in November 1995, Tony Stallone
Produce Co., encompassing 741 square feet in February 1996 and
Associates in Psychotherapy encompassing 1,724 square feet in July
1996.
The decrease in interest income from 1995 to 1996 was attributable to
a decrease in the average level of working capital available for short
term investments.
The decrease in real estate taxes for the three months ended September
30, 1996, as compared to the corresponding period in 1995 was
primarily a result of a decrease in real estate taxes at The
Cornerstone.
The decrease in real estate taxes for the nine months ended September
30, 1996, as compared to the corresponding period in 1995, was
primarily a result of successful tax appeals at Arlington Executive
Plaza and Oakpointe.
The decrease in operating expenses for the three months ended
September 30, 1996, as compared to the corresponding period in 1995,
resulted from several factors. At The Cornerstone, legal and
professional fees were reduced by $25,000. At Arlington Executive
Plaza, general building repair and maintenance, electricity and
painting costs decreased ($9,000). In addition, general building
repair and maintenance, electricity and space planning costs
decreased at Terracentre ($12,000) during the period.
The decrease in operating expenses for the nine months ended September
30, 1996, as compared to the corresponding period in 1995, was
primarily attributable to a decrease in utility costs, advertising and
space planning at The Cornerstone ($29,000).
12
<PAGE> 13
DAMSON/BIRTCHER REALTY INCOME FUND-I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont'd.)
Results of Operations for the Three Months Ended September 30, 1996
-------------------------------------------------------------------
Compared With the Three Months Ended September 30, 1995 and for the
-------------------------------------------------------------------
Nine Months Ended September 30, 1996 Compared With the Nine Months
------------------------------------------------------------------
Ended September 30, 1995 (Cont'd.)
------------------------
The decreases in depreciation and amortization expenses for the three
and nine months ended September 30, 1996 as compared to the
corresponding periods in 1995 were attributable to the adoption of
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," pursuant to which assets held for sale are no longer
depreciated.
For the nine months ended September 30, 1996, the carrying value of
the Partnership's portfolio was reduced by $1,870,000, which is
representative of the amount spent on building improvements, tenant
improvements, leasing commissions and other related assets at The
Cornerstone, Ladera-I Shopping Center, Terracentre, Arlington
Executive Plaza and Washington Technical Center during the period.
General and administrative expenses for the nine months ended
September 30, 1996 and 1995, include charges of $387,000 and $414,000,
respectively, from the General Partner and its affiliates for services
rendered in connection with administering the affairs of the
Partnership and operating the Partnership's properties. Also included
in general and administrative expenses for the nine months ended
September, 1996 and 1995, are direct charges of $321,000 and $314,000,
respectively, relating to audit fees, tax preparation fees, legal fees
and professional services, liability insurance expenses, costs
incurred in providing information to the Limited Partners and other
miscellaneous costs.
The decreases in general and administrative expenses for the three and
nine months ended September 30, 1996, as compared to the corresponding
periods in 1995, were primarily attributable to a decrease in leasing
fees and appraisal fees. The aforementioned decreases were partially
offset by an increase in professional services.
The increases in interest expenses for the three and nine months ended
September 30, 1996, as compared to the corresponding periods in 1995,
were attributable to a new loan arrangement that commenced in March
1996. Pursuant to that arrangement, the Partnership borrowed $700,000
for which it is paying interest only at 1% over the prime rate
(currently 9.25%) on the outstanding principal. Such interest
amounted to $16,000 and $34,000 for the three and nine months ended
September 30, 1996, respectively.
13
<PAGE> 14
DAMSON/BIRTCHER REALTY INCOME FUND-I
PART II. OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
-----------------
So far as is known to the General Partner, neither the Partnership nor
its properties are subject to any material pending legal proceedings.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
a) Exhibits:
27 - Financial Data Schedule
b) Reports on Form 8-K:
None filed in quarter ended September 30, 1996.
14
<PAGE> 15
DAMSON/BIRTCHER REALTY INCOME FUND-I
SIGNATURES
Pursuant to 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.
DAMSON/BIRTCHER REALTY INCOME FUND-I
By: DAMSON/BIRTCHER PARTNERS By: BIRTCHER PARTNERS,
(General Partner) a California general partnership
By: BIRTCHER INVESTMENTS,
a California general partnership,
General Partner of Birtcher Partners
By: BIRTCHER LIMITED,
a California limited partnership,
General Partner of Birtcher Investments
By: BREICORP,
a California corporation,
formerly known as Birtcher
Real Estate Inc., General
Partner of Birtcher Limited
Date: November 12, 1996 By: /s/ Robert M. Anderson
------------------------------
Robert M. Anderson
Executive Director
BREICORP
By: LF Special Fund II, L.P.,
a California limited partnership
By: Liquidity Fund Asset Management, Inc.,
a California corporation, General
Partner of LF Special Fund II, L.P.
Date: November 12, 1996 By: /s/ Brent R. Donaldson
--------------------------------
Brent R. Donaldson
President
Liquidity Fund Asset Management,
Inc.
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEETS AND STATEMENTS OF OPERATIONS OF DAMSON BIRTCHER REALTY INCOME FUND I AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 215,000
<SECURITIES> 0
<RECEIVABLES> 85,000
<ALLOWANCES> 46,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,447,000
<PP&E> 37,033,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 38,480,000
<CURRENT-LIABILITIES> 932,000
<BONDS> 3,679,000
0
0
<COMMON> 0
<OTHER-SE> 33,869,000
<TOTAL-LIABILITY-AND-EQUITY> 38,480,000
<SALES> 0
<TOTAL-REVENUES> 4,743,000
<CGS> 0
<TOTAL-COSTS> 2,734,000
<OTHER-EXPENSES> 1,870,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 240,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (101,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (101,000)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
