Section 13 or 15(d)
(As last amended by 34-31905, eff. 4/26/93)
[X] Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934 [Fee Required]
FORM 10-KSB--Annual or Transitional Report Under
For the fiscal year ended December 31, 1995
or
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 [No Fee Required]
For the transition period.........to.........
Commission file number 0-14483
DAVIDSON DIVERSIFIED REAL ESTATE II, L.P.
(Name of small business issuer in its charter)
Delaware 62-1207077
(State or other jurisdiction of (I.R.S. 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
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Units of Limited Partnership Interest
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $8,614,987
State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests, as of December 31, 1995. Market value information for the
Registrant's partnership interests is not available. Should a trading market
develop for these interests, it is the Managing General Partner's belief that
such trading would not exceed $25,000,000.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Prospectus of Registrant dated October 16, 1984 (included in
Registration Statement, No. 2-92313, of Registrant) are incorporated by
reference into Parts I and III.
PART I
Item 1. Description of Business
Davidson Diversified Real Estate II, L.P. ("the Registrant" or "the
Partnership") is a Delaware limited partnership organized in June 1984. The
general partners of the Registrant are Davidson Diversified Properties, Inc., a
Tennessee corporation ("Managing General Partner"); Freeman Equities, Limited
("Associate General Partner"); and David W. Talley ("Individual General
Partner") (collectively, the "General Partners").
The offering of the Registrant's limited partnership units ("Units")
commenced on October 16, 1984, and terminated on October 15, 1985. The
Registrant received gross proceeds from the offering of $24,485,000 and net
proceeds of $21,760,500.
The Registrant's primary business is to own, operate and ultimately
dispose of existing income-producing residential and, to a lesser extent,
existing and to-be-built commercial real estate. Industry segment information
is not relevant. The Registrant does not engage in any foreign operations nor
derive any income from foreign sources.
All of the net proceeds of the offering were invested in the Registrant's
eight properties, of which one has been sold and two have been foreclosed. See
"Item 2. Description of Properties", below for a description of the Registrant's
five remaining properties.
The Registrant receives income from its properties and is responsible for
operating expenses, capital improvements and debt service payments under
mortgage obligations secured by the properties. The Registrant financed its
properties primarily through non-recourse debt. Therefore, in the event of
default, the lender can generally only look to the subject property for recovery
of amounts due.
Both the income and expenses of operating the properties owned by the
Registrant are subject to factors outside of the Registrant's control, such as
oversupply of similar properties resulting from overbuilding, increases in
unemployment or population shifts, reduced availability of permanent mortgage
funds, changes in zoning laws, or changes in patterns or needs of users. In
addition, there are risks inherent in owning and operating residential
properties because such properties are susceptible to the impact of economic and
other conditions outside the control of the Registrant.
At this time, it appears that the Partnership's investment objective of
capital growth will not be attained. In addition, unless there is significant
improvement in the performance of the Registrant's properties and the markets in
which such properties are located, investors may not receive a return of a
portion or possibly any of their initial capital contributions.
For the year ended December 31, 1995, the Registrant's properties
accounted for, in the aggregate, over 99% of the Registrant's gross revenues.
All eight properties were acquired prior to December 31, 1985. Of the eight
properties originally acquired, only five remain.
The Registrant has no employees. Management and administrative services
are performed by Davidson Diversified Properties, Inc., the Managing General
Partner, and by Insignia Management Group, L.P., an affiliate of Insignia
Financial Group, Inc. ("Insignia"). See "Item 12. Certain Relationships and
Related Transactions" for an enumeration of the affiliates and the compensation
and reimbursement received from the Registrant during 1995 and 1994.
The real estate business in which the Partnership is engaged is highly
competitive and the Partnership is not a significant factor in this industry.
The Registrant's real property investments are subject to competition from
similar types of properties in the vicinities in which they are located. In
addition, various limited partnerships have been formed by related parties to
engage in business which may be competitive with the Registrant.
Item 2. Description of Properties:
The following table sets forth the Registrant's investments in properties
as of December 31, 1995:
<TABLE>
<CAPTION>
Date of
Property Purchase Type of Ownership Use
<S> <C> <C> <C>
Big Walnut Apartments 03/28/85 Fee ownership subject Apartment -
Columbus, Ohio to first and second 251 units
mortgages
LaFontenay Apartments 10/31/84 Fee ownership subject Apartment -
(Phase I and II) to first mortgage 260 units
Louisville, Kentucky
The Trails Apartments 08/30/85 Fee ownership subject Apartment -
Nashville, Tennessee to first mortgage 248 units
Greensprings Manor Apartments 09/30/85 Fee ownership subject Apartment -
Indianapolis, Indiana to first and second 582 units
mortgages
Outlet's Ltd. Mall 12/31/84 Fee ownership subject Commercial -
Murfreesboro, Tennessee to first mortgage 118,103 sq.ft.
</TABLE>
Schedule of Properties:
<TABLE>
<CAPTION>
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
<S> <C> <C> <C> <C> <C>
Big Walnut Apartments $ 7,941,885 $ 3,360,504 5-25 yrs S/L $ 2,964,869
LaFontenay I & II Apartments 8,571,744 3,659,682 5-25 yrs S/L 3,361,626
The Trails Apartments 8,072,356 3,282,066 5-25 yrs S/L 3,926,115
Greensprings Apartments 11,759,344 4,923,775 5-25 yrs S/L 5,464,938
Outlet's Ltd. Mall 6,508,942 2,286,539 5-25 yrs S/L 3,675,328
$42,854,271 $17,512,566 $19,392,876
</TABLE>
See "Note A" of the financial statements included in "Item 7" for a
description of the Partnership's depreciation policy.
Schedule of Mortgages:
<TABLE>
<CAPTION>
Principal Principal
Balance At Stated Balance
December Interest Period Maturity Due At
Property 1995 Rate Amortized Date Maturity
<S> <C> <C> <C> <C> <C>
Big Walnut Apartments
1st mortgage $ 5,050,619 7.60% 257 months 11/15/02 $ 3,911,665
2nd mortgage 167,025 7.60% 257 months 11/15/02 167,025
LaFontenay I & II Apartments
1st mortgage 6,795,133 9.25% 360 months 06/01/97 6,728,189
The Trails Apartments
1st mortgage 6,000,000 (1) 140 months 12/01/09 6,000,000
Greensprings Apartments
1st mortgage 8,877,590 7.60% 257 months 11/15/02 6,875,645
2nd mortgage 293,584 7.60% 257 months 11/15/02 293,584
Outlet's Ltd. Mall
1st mortgage 1,770,183 10.125% 180 months 01/15/00 1,489,861
28,954,134 $25,465,969
Less unamortized
discounts (1,990,373)
Total $26,963,761
<FN>
(1) Adjustable rate based on 75% of the interest rate on new-issue long-term
A-rate utility bonds as determined on the first day of each calendar
quarter. The rate at December 31, 1995, was 5.7%.
</TABLE>
On January 19, 1995, the Partnership refinanced the mortgage encumbering
Outlet's Ltd. Mall. The total indebtedness refinanced was $1,765,589, of which
$337,494 related to the first mortgage and $1,428,095 related to the second
mortgage. The refinancing replaced the existing indebtedness which carried
stated interest rates from 8.5% to 10.75 % with maturity dates ranging from
April 1995 to October 1995. The new mortgage indebtedness of $1,820,000 carries
a stated interest of 10.125% and is amortized over 180 months with a balloon
payment due on January 15, 2000. As a result of the refinancing, the
Partnership recognized an extraordinary loss of $32,181, due to the write-off of
an unamortized mortgage discount and unamortized loan costs, during the fiscal
year ended December 31, 1995.
Schedule of Rental Rates and Occupancy:
Average Annual Average Annual
Rental Rates Occupancy
Property 1995 1994 1995 1994
Big Walnut Apartments $5,924/unit $5,653/unit 96% 97%
LaFontenay I & II Apartments 6,623/unit 6,437/unit 94% 95%
The Trails Apartments 6,251/unit 5,975/unit 97% 97%
Greengsprings Apartments 4,729/unit 4,594/unit 92% 88%
Outlet's Ltd. Mall 7.56/sq.ft 7.29/sq.ft 90% 94%
As noted under "Item 1. Description of Business", the real estate industry is
highly competitive. All of the properties of the Partnership are subject to
competition from other residential apartment complexes and commercial buildings
in the area. The Managing General Partner believes that all of the properties
are adequately insured. The multi-family residential properties' lease terms
are for one year or less. No residential tenant leases 10% or more of the
available space.
The following is a schedule of the lease expirations at Outlet's Limited Mall
for the years beginning 1996 through the maturities of current leases:
Number of Square Annual % of Gross
Expirations Feet Rent Annual Rent
Outlet's Ltd. Mall
1996 2 6,894 $ 54,352 5.64%
1997 10 24,190 219,202 22.74%
1998 3 15,672 124,025 12.86%
1999 7 24,815 223,756 23.21%
2000 6 21,070 193,202 20.04%
2001 3 12,305 101,477 10.53%
Real estate taxes and rates in 1995 for each property were:
1995 1995
Billing Rate
Big Walnut Apartments $123,131 5.96%
LaFontenay I & II Apartments 87,414 1.12%
The Trails Apartments 91,953 3.50%
Greensprings Apartments 273,245 7.87%
Outlet's Ltd. Mall 151,538 5.43%
Item 3. Legal Proceedings
The Registrant is unaware of any pending or outstanding litigation that is
not of a routine nature. The Managing General Partner of the Registrant
believes that all such pending or outstanding litigation will be resolved
without a material adverse effect upon the business, financial condition, or
operations of the Partnership.
Item 4. Submission of Matters to a Vote of Security Holders
During the quarter ended December 31, 1995, no matter was submitted to a vote
of the unit holders through the solicitation of proxies or otherwise.
PART II
Item 5. Market for Partnership Equity and Related Partner Matters
There is no established market for the Units and it is not anticipated that
any will occur in the foreseeable future. As of December 31, 1995, there were
1,734 holders of record owning an aggregate of 1,224.25 Units.
There were no distributions to the partners during 1994. During the year
ended December 31, 1995, $1,861 of distributions were paid on behalf of the
limited partners to the State of Indiana relating to the operations of
Greensprings Manor Apartments. The Registrant does not anticipate making
distributions during 1996.
Pursuant to the terms of the Partnership Agreement, there are restrictions on
the ability of the Limited Partners to transfer their Units. In all cases, the
General Partners must consent to any transfer.
The Revenue Act of 1987 contained provisions which have an adverse impact on
investors in " publicly traded partnerships." Accordingly, the General Partners
have established a policy of imposing limited restrictions on the
transferability of the Units in secondary market transactions. Implementation
of this policy should prevent a public trading market from developing and may
impact the ability of an investor to liquidate his investment quickly. It is
expected that such policy will remain in effect until such time, if ever, as
further clarification of the Revenue Act of 1987 may permit the Registrant to
lessen the scope of the restrictions.
There are no material restrictions upon the Registrant's present or future
ability to make distributions in accordance with the provisions of the
Registrant's Partnership Agreement.
Item 6. Management's Discussion and Analysis or Plan of Operation
Results of Operations
The Partnership's net loss as shown in the financial statements for the year
ended December 31, 1995, was $212,107 versus $152,983 for the year ended
December 31, 1994. The increased net loss for the year is primarily
attributable to increases in general and administrative expenses and
depreciation expense. Partially offsetting these increases in expenses was an
increase in rental revenue. Rental revenue increased due to increased average
annual rental rates at each of the apartment properties. Occupancy increased at
Greensprings Manor Apartments due to improved customer service and upgrades at
the property. Occupancy at Outlets Mall decreased as a result of the
termination of the London Fog lease. General and administrative expense
increased due to increases in partnership administration cost reimbursements.
Depreciation expense increased due to increased capital improvements made at
Outlets Mall.
A $6,863 and $11,989 loss on disposal of property was recorded in 1995 and
1994, respectively, as the result of the write-off of roofs that were not fully
depreciated at LaFontenay Apartments (1995 and 1994), Big Walnut Apartments
(1994) and The Trails Apartments (1994). During the year ended December 31,
1995, the Partnership recorded two casualties amounting to a $11,977 loss. Big
Walnut Apartments incurred storm damage which resulted in a casualty gain of
$2,358, net of insurance proceeds. The Trails Apartments continued to
experience problems with the pool due to freeze damage and recorded a casualty
loss of $14,335, net of insurance proceeds. The Partnership's properties
experienced multiple casualties in 1994. Greensprings Apartments suffered fire
damage, The Trails Apartments suffered freeze damage and LaFontenay Apartments
suffered fire and storm damages. The Partnership recorded a casualty gain of
$105,628 in 1994 as a result of these casualties. On January 19, 1995, the
Partnership refinanced the mortgage encumbering Outlet's Ltd. Mall. As a result
of the refinancing, the Partnership recognized an extraordinary loss of $32,181,
due to the write-off of an unamortized mortgage discount and unamortized loan
costs.
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.
Liquidity and Capital Resources
At December 31, 1995, the Partnership had unrestricted cash of $714,045
versus unrestricted cash of $794,412 at December 31, 1994. Net cash provided by
operating activities increased due to a decrease in accounts receivable and
other assets, which was partially offset by a decrease in accounts payable. Net
cash used in investing activities increased due to an increase in property
improvements. This increase was partially offset by an increase in insurance
proceeds from property damage. Net cash used in financing activities decreased
due to decreased payments on mortgage notes payable.
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 $26,963,761 (net of discount), with stated interest
rates of 7.6% to 10.125%, has maturity dates ranging from June 1997 to November
2002. Included in the outstanding indebtedness is a first mortgage, secured by
the LaFontenay Apartments, which matures June 1, 1997, with a principal balance
due at maturity of $6,728,189. The Managing General Partner intends to
refinance this indebtedness in order to obtain a more favorable interest rate.
The Managing General Partner is exploring the feasibility of selling Outlet's
Mall. If the Managing General Partner is not successful in selling this
property, then the Managing General Partner also intends to refinance the first
mortgage secured by the property in order to obtain a more favorable interest
rate. There are no guarantees that a sale or refinance will be successful.
No distributions were made during the year ended December 31, 1994. During
the year ended December 31, 1995, $1,861 of distributions were paid on behalf of
the limited partners to the State of Indiana relating to the operations of
Greensprings Manor Apartments. Future cash distributions will depend on the
levels of net cash generated from operations, refinancing, property sales and
the availability of the cash reserves.
ITEM 7. FINANCIAL STATEMENTS
DAVIDSON DIVERSIFIED REAL ESTATE II, L.P.
LIST OF FINANCIAL STATEMENTS
Independent Auditors' Report
Balance Sheet - December 31, 1995
Statements of Operations - Years ended December 31, 1995 and 1994
Statements of Changes in Partners Capital (Deficit) - Years ended
December 31, 1995 and 1994
Statements of Cash Flows - Years ended December 31, 1995 and 1994
Notes to Financial Statements
INDEPENDENT AUDITORS' REPORT
Reports of Ernst & Young LLP, Independent Auditors
The Partners
Davidson Diversified Real Estate II, L.P.
We have audited the accompanying balance sheet of Davidson Diversified Real
Estate II, L.P. (A Limited Parntership) as of December 31, 1995, and the related
statements of operations, changes in partners' captial (deficit) and cash flows
for each of the two years in the period ended December 31, 1995. These
financial statements are the responsibility of the Parntership's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with general accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Parntership's management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a resonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Davidson Diversified Real
Estate II, L.P. (A Limited Partnership) as of December 31, 1995, and the
results of its operations and its cash flows for each of the two years in the
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
/s/ERNST & YOUNG LLP
Greenville, South Carolina
February 15, 1996
DAVIDSON DIVERSIFIED REAL ESTATE II, L.P.
BALANCE SHEET
December 31, 1995
Assets
Cash and cash equivalents:
Unrestricted $ 714,045
Restricted--tenant security deposits 183,429
Accounts receivable 74,368
Escrow for taxes 346,336
Restricted escrows 642,739
Other assets 496,882
Investment properties (Notes B and F):
Land $ 2,878,470
Buildings and related personal
property 39,975,801
42,854,271
Less accumulated depreciation (17,512,566) 25,341,705
$27,799,504
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 176,686
Tenant security deposits 185,268
Accrued taxes 508,885
Other liabilities 302,263
Mortgage notes payable (Notes B and F) 26,963,761
Partners' Capital (Deficit)
General partners $ (442,689)
Limited partners (1,224.25 units
issued and outstanding) 105,330 (337,359)
$27,799,504
See Accompanying Notes to Financial Statements
DAVIDSON DIVERSIFIED REAL ESTATE II, L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994
<S> <C> <C>
Revenues:
Rental income $ 7,986,235 $ 7,656,001
Other income 628,752 661,936
Total revenues 8,614,987 8,317,937
Expenses:
Operating 2,539,133 2,554,698
General and administrative 208,834 127,149
Property management fees 452,959 437,753
Maintenance 998,762 1,065,376
Depreciation 1,793,017 1,622,640
Interest 2,545,942 2,601,113
Property taxes 726,524 691,853
Tenant reimbursements (489,098) (536,023)
8,776,073 8,564,559
Loss before loss on disposal of property,
casualty (loss) gain and extraordinary item (161,086) (246,622)
Loss on disposal of property (6,863) (11,989)
Casualty (loss) gain (Note G) (11,977) 105,628
Loss before extraordinary loss (179,926) (152,983)
Extraordinary loss on retirement of debt (Note B) (32,181) --
Net loss (Note D) $ (212,107) $ (152,983)
Net loss allocated to
general partners (2%) $ (4,242) $ (3,060)
Net loss allocated to
limited partners (98%) (207,865) (149,923)
Net loss $ (212,107) $ (152,983)
Per limited partnership unit:
Loss before extraordinary loss $ (144.03) $ (122.46)
Extraordinary loss (25.76) --
Net loss $ (169.79) $ (122.46)
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
DAVIDSON DIVERSIFIED REAL ESTATE II, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partners Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 1,224.25 $ 1,000 $24,485,000 $24,486,000
Partners' (deficit) capital
at December 31, 1993 1,224.25 $(435,387) $ 464,979 $ 29,592
Net loss for the year
ended December 31, 1994 -- (3,060) (149,923) (152,983)
Partners' (deficit) capital
at December 31, 1994 1,224.25 (438,447) 315,056 (123,391)
Distributions -- -- (1,861) (1,861)
Net loss for the year ended
December 31, 1995 -- (4,242) (207,865) (212,107)
Partners' (deficit) capital
at December 31, 1995 1,224.25 $(442,689) $ 105,330 $ (337,359)
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
DAVIDSON DIVERSIFIED REAL ESTATE II, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (212,107) $ (152,983)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 1,793,017 1,622,640
Amortization of discounts and loan costs 255,319 308,691
Loss on disposal of property 6,863 11,989
Casualty loss (gain) 11,977 (105,628)
Extraordinary loss on retirement of debt 32,181 --
Change in accounts:
Restricted cash 14,917 13,050
Accounts receivable 56,298 18,809
Escrow for taxes (61,170) 36,337
Other assets 8,116 (63,524)
Accounts payable (257,493) 2,572
Tenant security deposit liabilities (20,371) (5,757)
Accrued taxes 16,333 (77,730)
Other liabilities (28,907) (45,181)
Net cash provided by operating activities 1,614,973 1,563,285
Cash flows from investing activities:
Property improvements and replacements (1,351,482) (1,260,561)
Deposits to restricted escrows (124,733) (166,109)
Receipts from restricted escrows 78,796 169,425
Insurance proceeds from property damage 110,212 51,152
Net cash used in investing activities (1,287,207) (1,206,093)
Cash flows from financing activities:
Payments on mortgage notes payable (430,001) (612,640)
Repayment of mortgage notes payable (1,765,589) --
Proceeds from long-term borrowings 1,820,000 --
Loan costs (30,682) --
Distributions (1,861) --
Net cash used in financing activities (408,133) (612,640)
Net decrease in cash (80,367) (255,448)
Cash at beginning of period 794,412 1,049,860
Cash at end of period $ 714,045 $ 794,412
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,283,240 $ 2,314,525
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
DAVIDSON DIVERSIFIED REAL ESTATE II, L.P.
STATEMENTS OF CASH FLOWS (continued)
Supplemental Disclosure of Non-Cash Activity
Property Improvement and Replacements
Accounts payable was adjusted $40,626 at December 31, 1994, for non-cash amounts
in connection with property improvements and replacements.
Property Damage
The changes in accounts receivable and accounts payable were adjusted by
$163,890 and $56,286, respectively, at December 31, 1994, for non-cash amounts
in connection with property damage.
The change in accounts receivable was adjusted by $25,000 at December 31, 1995
for non-cash amounts in connection with property damage.
See Accompanying Notes to Financial Statements
DAVIDSON DIVERSIFIED REAL ESTATE II, L.P.
Notes to Financial Statements
December 31, 1995
Note A - Organization and Significant Accounting Policies
Organization
Davidson Diversified Real Estate II, L.P. (the "Partnership" or "Registrant") is
a Delaware limited partnership organized in June 1984 to acquire and operate
residential and commercial real estate properties. The Partnership's Managing
General Partner is Davidson Diversified Properties, Inc., an affiliate of
Insignia Financial Group, Inc. As of December 31, 1995, the Partnership
operates four residential and one commercial property located in or near major
urban areas in the United States.
Principles of Consolidation
The financial statements include all the accounts of the Partnership and a 99.9%
owned partnership. All significant interpartnership balances have been
eliminated.
Allocations to Partners
Net income, other than that arising from the occurrence of a sale or
refinancing, and net loss shall be allocated 2% to the general partners and 98%
to the limited partners.
Cash from sales or refinancings shall be distributed in the following order of
priority:
First, to the limited partners, an amount which when added to all prior
distributions of cash from sales or refinancings shall equal their original
invested capital, plus an amount which, when added to all prior distributions to
the limited partners (excluding distributions which are deducted in the
calculation of adjusted invested capital), will equal 8% per annum cumulative
noncompounded on the adjusted invested capital, commencing the last day of the
calendar quarter in which each limited partner is admitted to the partnership
through the date of payment; and Second, after payment to an affiliate of the
general partners of an amount equal to its subordinated real estate commissions,
85% of the remaining cash from sales or refinancings to the limited partners and
15% of the remaining cash from sales or refinancings to the general partners.
Restricted Escrows
Capital Improvement Reserves - At the time of the prior refinancing of Big
Walnut Apartments mortgage notes payable, proceeds were designated for a
capital improvement escrow for certain capital improvements. At December
31, 1995, Big Walnut Apartments had unexpended balances of $18,105. The
Managing General Partner anticipates all of the unexpended balances to be
used in 1996 for certain routine capital expenditures and maintenance
expenses. Upon completion of scheduled property improvements, any excess
funds will be returned to the property for property operations.
Note A - Organization and Significant Accounting Policies (continued)
Reserve Account - In addition to the Capital Improvement Reserve, a general
Reserve Account of $202,800 was established with the refinancing proceeds
for each refinanced property. These funds were established to cover
necessary repairs and replacements of existing improvements, debt service,
out-of-pocket expenses incurred for ordinary and necessary administrative
tasks, and payment of real property taxes and insurance premiums. The
Partnership is required to deposit net operating income (as defined in the
mortgage note) from each refinanced property to the respective reserve
account until the reserve accounts equal $1,000 per apartment unit or
$833,000 in total. At December 31, 1995, the account balances were
$254,009 for Big Walnut Apartments and $280,326 for Greensprings Manor
Apartments.
Replacement Reserve - LaFontenay Apartments has a replacement reserve as
required by its lender of $87,643 at December 31, 1995, for capital
improvements.
Escrows for Taxes - These escrows are designated for the payment of real estate
taxes as designated. The Partnership and external escrow agents currently
maintain these accounts.
Investment Properties
Prior to the fourth quarter of 1995, investment properties were carried at the
lower of cost or estimated fair value, which was determined using the net
operating income of the investment property capitalized at a rate deemed
reasonable for the type of property. During the fourth quarter of 1995 the
Partnership adopted FASB Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. The
impairment loss is measured by comparing the fair value of the asset to its
carrying amount. The effect of adoption was not material.
Depreciation
Depreciation is calculated using the straight-line method over the estimated
lives of the properties and related personal property. For Federal income tax
purposes, the accelerated cost recovery method is used (1) for real property
over 18 years for additions after March 15, 1984, and before May 9, 1985, and 19
years for additions after May 8, 1985, and before January 1, 1987, and (2) for
personal property over 5 years for additions prior to January 1, 1987. As a
result of the Tax Reform Act of 1986, for additions after December 31, 1986, the
modified accelerated cost recovery method is used for depreciation of (1) real
property additions over 27 1/2 years, and (2) personal property additions over 7
years. Effective generally for property placed in service on or after May 13,
1993, the Great Deficit Reduction Act of 1993 increases the depreciation period
from 31.5 to 39 years, although transition rules apply to property placed in
service before 1994.
Note A - Organization and Significant Accounting Policies (continued)
Present Value Discounts
Periodically, the Partnership incurs debt at below market rates. Present value
discounts are recorded on the basis of prevailing market rates and are amortized
using the interest method over the life of the related debt. The amortization
expense is included in interest expense.
Loan Costs
Loan costs are included in "Other assets" and are being amortized on a straight-
line basis over the life of the respective loans. The amortization expense is
included in interest expense.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with a maturity when
purchased of three months or less to be cash equivalents. At certain times, the
amount of cash deposited at a bank may exceed the limit on insured deposits.
Leases
The Partnership generally leases apartment units for twelve-month terms or less.
The Partnership leases certain commercial space to tenants under various lease
terms. The leases are accounted for as operating leases in accordance with
Financial Accounting Standards Board Statement No. 13.
Some of the leases contain stated rental increases during their term. For
leases with fixed rental increases, rents are recognized on a straight-line
basis over the terms of the lease. This straight-line basis recognized $32,747
(1995) and $22,859 (1994) more in rental income than was collected. This amount
will be collected in future years as cash collections under the terms of the
leases exceed the straight-line basis of revenue recognition.
For all other leases, minimum rents are recognized over the terms of the leases.
The Managing General Partner finds it necessary to offer rental concessions
during particularly slow months or in response to heavy competition from other
similar complexes in the area. During 1995, the properties offered various
concessions including reduced rent for the first month, variable move-in
allowances, and reduced security deposits. Concessions are charged to expense
as incurred.
Restricted Cash - Tenant Security Deposits
The Partnership requires security deposits from all apartment lessees for the
duration of the lease and are considered restricted cash. Deposits are refunded
when the tenant vacates the apartment if there has been no damage to the unit.
Note A - Organization and Significant Accounting Policies (continued)
Advertising Costs
Advertising costs of $315,359 and $308,795 for the years ended December 31,
1995, and December 31, 1994, respectively, are charged to expense as they are
incurred and are included in operating expenses.
Reclassifications
Certain reclassifications have been made to the 1994 balances to conform to the
1995 presentation.
Fair Value
In 1995, the Partnership implemented Statement of Financial Accounting Standards
No. 107, "Disclosure about Fair Value of Financial Instruments," which requires
disclosure of fair value information about financial instruments for which it is
practicable to estimate that value. The carrying amount of the Partnership's
cash and cash equivalents approximates fair value due to short-term maturities.
The Partnership estimates the fair value of its fixed rate mortgage by
discounted cash flow analysis, based on estimated borrowing rates currently
available to the Partnership. The carrying amounts of variable-rate mortgages
approximate fair value due to frequent re-pricing.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Note B - Mortgage Notes Payable
The principal terms of mortgage notes payable are as follows:
<TABLE>
<CAPTION>
Principal
Monthly Principal Balance
Payment Stated Balance Due At
Including Interest Maturity Due At December 31,
Property Interest Rate Date Maturity 1995
<S> <C> <C> <C> <C>
Mortgages:
Big Walnut Apartments
1st mortgage $ 42,624 7.60% 11/15/02 $ 3,911,665 $ 5,050,619
2nd mortgage 1,058 7.60% 11/15/02 167,025 167,025
LaFontenay I & II Apartments
1st mortgage 56,080 9.25% 06/01/97 6,728,189 6,795,133
The Trails Apartments
1st mortgage 28,500 (1) 12/01/09 6,000,000 6,000,000
Greensprings Apartments
1st mortgage 74,921 7.60% 11/15/02 6,875,645 8,877,590
2nd mortgage 1,859 7.60% 11/15/02 293,584 293,584
Outlets Ltd. Mall
1st mortgage 19,697 10.125% 01/15/00 1,489,861 1,770,183
$224,739 $25,465,969 28,954,134
Less unamortized discounts (1,990,373)
Total $26,963,761
<FN>
(1) Adjustable rate based on 75% of the interest rate on new-issue long-term A-
rated utility bonds as determined on the first day of each calendar
quarter. The rate at December 31, 1995, was 5.7%.
</TABLE>
The estimated fair values of the Partnership's aggregate debt is approximately
$29,200,000. This value represents a general approximation of possible value
and is not necessarily indicative of the amounts the Partnership may pay in
actual market transactions.
The discount is reflected as a reduction of the mortgage notes payable and
increases the effective rate of the debt to 8.76% for Big Walnut Apartments and
Greensprings Apartments and 11.60% for The Trails Apartments.
Note B - Mortgage Notes Payable (continued)
On January 19, 1995, the Partnership refinanced the mortgage encumbering
Outlet's Ltd. Mall. The total indebtedness refinanced was $1,765,589, of which
$337,494 related to the first mortgage and $1,428,095 related to the second
mortgage. The refinancing replaced the existing indebtedness which carried a
stated interest rate from 8.5% to 10.75% with maturity dates ranging from April
1995 to October 1995. The new mortgage indebtedness of $1,820,000 carries a
stated interest rate of 10.125% and is amortized over 180 months with a balloon
payment due on January 15, 2000. As a result of the refinancing, the
Partnership recognized an extraordinary loss of $32,181, as a result of the
write-off of an unamortized mortgage discount and unamortized loan costs.
Mortgages are nonrecourse and are collateralized by the related property and
improvements and by pledge of revenues from the property and improvements of the
Partnership. Certain of the notes require prepayment penalties if repaid prior
to maturity and prohibit resale of the properties subject to existing
indebtedness.
Scheduled principal payments of mortgage notes payable, subsequent to December
31, 1995, are as follows:
1996 $ 470,722
1997 7,208,303
1998 497,395
1999 538,546
2000 1,983,410
Thereafter 18,255,758
$28,954,134
Note C - Leases
Property and improvements consist of apartment complexes and a shopping center
which are under operating leases. Lease terms are one year or less for
apartments and generally three to five years with renewal options for tenants of
the shopping center.
Tenants of Outlet's Mall reimburse the shopping center for common area expenses,
including taxes, utilities, and insurance.
Approximate minimum rentals for noncancelable operating leases with remaining
terms of more than one year are as follows:
Year Amount
1996 $ 887,729
1997 798,410
1998 595,888
1999 471,448
2000 174,701
2001 24,575
$2,952,751
Note C - Leases (continued)
These amounts do not include contingent rentals determined as a percentage of
tenant sales and reimbursement for real estate taxes and common area maintenance
costs.
Note D - Income Taxes
The Partnership has received a ruling from the Internal Revenue Service that it
will be classified as a partnership for Federal income tax purposes.
Accordingly, no provision for income taxes is made in the financial statements
of the Partnership. Taxable income or loss of the Partnership is reported in
the income tax returns of its partners.
The following is a reconciliation of reported net loss and Federal taxable loss:
1995 1994
Net loss as reported $ (212,107) $ (152,983)
Add (deduct):
Depreciation differences (214,191) (298,504)
Amortization of present value discounts 51,447 53,644
Disposal of property 6,863 (42,486)
Unearned income (17,269) 72,984
Miscellaneous (4,323) (5,995)
Federal taxable loss $ (389,580) $ (373,340)
Federal taxable loss per limited
partnership unit $ (311.85) $ (298.85)
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities:
Net deficit as reported $ (337,359)
Land and buildings 3,642,977
Accumulated depreciation (9,591,806)
Mortgage discount (1,260,131)
Other 124,302
Net deficit - Federal tax basis $(7,422,017)
Note E - Transactions with Affiliated and Other Parties
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
partnership activities. The Partnership Agreement provides for payments to
affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. The following were paid to the
Managing General Partner and affiliates in 1995 and in 1994:
Years Ended December 31,
1995 1994
Property management fees $370,224 $355,541
Reimbursement for services from affiliates 150,538 157,845
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.
Note F - Investment Properties and Accumulated Depreciation
Initial Cost
To Partnership
Cost
Buildings Capitalized
and Related (Removed)
Personal Subsequent to
Encumbrances Land Property Acquisition
Apartment Properties
LaFontenay $ 6,795,133 $ 650,000 $ 6,719,151 $ 1,202,593
Big Walnut 5,217,644 520,000 6,504,629 917,256
The Trails 6,000,000 585,857 7,053,654 432,845
Greensprings Manor 9,171,174 847,613 9,684,560 1,227,171
Shopping Center
Outlets Ltd. Mall 1,770,183 275,000 4,519,041 1,714,901
28,954,134
Less unamortized
discounts (1,990,373)
Totals $26,963,761 $2,878,470 $34,481,035 $ 5,494,766
Note F - Investment Properties and Accumulated Depreciation (continued)
<TABLE>
<CAPTION>
Gross Amount At Which Carried
At December 31, 1995
Buildings
And Related
Personal Accumulated Date of Date Depreciable
Description Land Property Total Depreciation Construction Acquired Life-Years
<S> <C> <C> <C> <C> <C> <C> <C>
Apartment Properties
LaFontenay $ 650,000 $ 7,921,744 $ 8,571,744 $ 3,659,682 1971-1973 10/31/84 5-25
Big Walnut 520,000 7,421,885 7,941,885 3,360,504 1971 03/28/85 5-25
The Trails 585,857 7,486,499 8,072,356 3,282,066 1984-1985 08/30/85 5-25
Greensprings Manor 847,613 10,911,731 11,759,344 4,923,775 1970-1975 09/30/85 5-25
Shopping Center
Outlets Ltd. Mall 275,000 6,233,942 6,508,942 2,286,539 1980 12/31/84 5-25
Totals $2,878,470 $39,975,801 $42,854,271 $17,512,566
</TABLE>
Reconciliation of "Investment Properties and Accumulated Depreciation":
Years Ended October 31,
1995 1994
Real Estate
Balance at beginning of year $41,528,527 $40,361,230
Property improvements 1,351,482 1,301,187
Disposals of property (25,738) (133,890)
Balance at End of Year $42,854,271 $41,528,527
Accumulated Depreciation
Balance at beginning of year $15,738,424 $14,184,557
Additions charged to expense 1,793,017 1,622,640
Disposals of property (18,875) (68,773)
Balance at end of year $17,512,566 $15,738,424
Note F - Investment Properties and Accumulated Depreciation (continued)
<TABLE>
<S> <C>
The aggregate cost of the investment properties for Federal income tax purposes
at December 31, 1995 and 1994 is $46,497,248 and $45,148,125, respectively. The
accumulated depreciation taken for Federal income tax purposes at December 31,
1995 and 1994 is $27,104,372 and $25,097,164, respectively.
Note G - Casualty (Loss) Gain
The Partnership's properties experienced multiple casualties in 1994.
Greensprings suffered fire damage resulting in the receipt of $4,655 of
insurance proceeds and a $4,765 casualty loss for 1994. The Trails suffered
freeze damage resulting in the receipt of $37,003 of insurance proceeds and a
$3,111 casualty gain for 1994. LaFontenay suffered fire, storm, and
miscellaneous damages resulting in insurance proceeds of approximately $227,598
and a corresponding casualty gain of $107,282 for 1994. A $163,890 receivable
for insurance proceeds and a $56,286 payable related to the fire damage were
recorded in relation to the $107,282 gain recognized by LaFontenay in 1994.
The Partnership's properties experienced two casualties in 1995. Big Walnut
Apartments incurred storm damage which resulted in a casualty gain of $2,358,
net of insurance proceeds. The Trails Apartments continued to experience
problems with the pool due to freeze damage and recorded a casualty loss of
$14,335, net of insurance proceeds.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
The Registrant does not have any directors or officers. The Managing
General Partner, Davidson Diversified Properties, Inc., is responsible for the
management and control of substantially all of the Registrant's operations and
has general responsibility and ultimate authority in all matters affecting the
Registrant's business. The Individual General Partner, in his capacity as such,
did not devote any material amount of business time or attention to the
Registrant's affairs.
The present officers of the Managing General Partner are listed below:
Name Age Position
Carroll D. Vinson 55 President
Robert D. Long, Jr. 28 Controller and Principal
Accounting Officer
William H. Jarrard, Jr. 49 Vice President
John K. Lines 36 Vice President and
Secretary
Kelley M. Buechler 38 Assistant Secretary
Carroll D. Vinson has been President of Davidson Diversified Properties, Inc.
since August of 1994. Prior to that, from April 1993 to August 1994, Mr. Vinson
was affiliated with Crisp, Hughes & Co. (regional CPA firm) and engaged in various
other investment and consulting activities. Briefly, in early 1993, Mr. Vinson
served as President and Chief Executive Officer of Angeles Corporation, a real
estate investment firm. From 1991 to 1993, Mr. Vinson was employed by Insignia in
various capacities including Managing Director-President during 1991. From 1986
to 1990, Mr. Vinson was President and a Director of U.S. Shelter Corporation, a
real estate services company, which sold substantially all of its assets to
Insignia in December 1990.
Robert D. Long, Jr. is Controller and Principal Accounting Officer of Davidson
Diversified Properties, Inc. Prior to joining Metropolitan Asset Enhancement,
L.P., and subsidiaries, he was an auditor for the State of Tennessee and was
associated with the accounting firm of Harshman Lewis and Associates. He is a
graduate of The University of Memphis.
William H. Jarrard, Jr. is Managing Director - Partnership Administration of
Insignia Financial Group, Inc. ("Insignia"). He is also Vice President of
Davidson Diversified Properties, Inc. and Vice President of Davidson Properties,
Inc., an affiliate of Davidson Diversified Properties, Inc. During the five years
prior to joining Insignia in 1991, he served in a similar capacity for U.S.
Shelter. He was previously associated with the accounting firm, Ernst & Whinney,
for eleven years. Mr. Jarrard is a graduate of the University of South Carolina
and a certified public accountant.
John K. Lines has been General Counsel and Secretary of Insignia since June 1994.
From May 1993 until June 1994, Mr. Lines was the Assistant General Counsel and
Vice President of Oewen Financial Corporation in West Palm Beach, Florida. From
October 1991 until April 1993, Mr. Lines was a Senior Attorney with Banc One
Corporation in Columbus, Ohio. From May 1984 until October 1991, Mr. Lines was
employed as an Associate Attorney with Squire Sanders & Dempsey in Columbus, Ohio.
Kelley M. Buechler is Assistant Secretary of Insignia. During the five years
prior to joining Insignia in 1991, she served in a similar capacity for U.S.
Shelter. Ms. Buechler is a graduate of the University of North Carolina.
Item 10. Executive Compensation
The Registrant was not required to and did not pay remuneration to officers
and/or directors of the Managing General Partner during 1995 or 1994. See "Item
12" below and "Note E" of the Notes to the Financial Statements for a discussion
of compensation and reimbursements paid to the General Partners and certain
affiliates.
Item 11. Security Ownership of Certain Beneficial Owners and Management
As of December 31, 1995, no security holder was known by the Registrant to
be the beneficial owner of more than 5% of the Units of the Registrant.
As of December 31, 1995, no director or officer of the Managing General
Partner owns, nor do the directors or officers as a whole own more than 1% of the
Registrant's Units. No such director or officer had any right to acquire
beneficial ownership of additional Units of the Registrant.
Item 12. Certain Relationships and Related Transactions
No transactions have occurred between the Partnership and any officer or
director of Davidson Diversified Properties, Inc.
During the years ended December 31, 1995, and December 31, 1994, the
transactions that occurred between the Partnership and Davidson Diversified
Properties, Inc. and affiliates of Davidson Diversified Properties, Inc. pursuant
to the terms of the Agreement are disclosed under "Note E" of the Partnership's
Financial Statements included under "Item 7", which is hereby incorporated by
reference.
</TABLE>
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits: See Exhibit Index contained herein.
(b) No Reports on Form 8-K were filed during the fourth quarter of
1995.
SIGNATURES
In accordance with Section 13 or 15(d) 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 II, L.P.
By: Davidson Diversified Properties, Inc.,
as Managing General Partner
By: /s/Carroll D. Vinson
Carroll D. Vinson
President
Date: March 21, 1996
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
date indicated.
/s/Carroll D. Vinson President March 21, 1996
Carroll D. Vinson
/s/Robert D. Long, Jr. Controller March 21, 1996
Robert D. Long, Jr. (Principal Accounting
Officer)
EXHIBIT INDEX
Exhibit
<TABLE>
<S> <C>
3 Partnership Agreement dated June 11, 1984, as amended is incorporated
by reference to Exhibit A to the Prospectus of the Registrant dated
October 16, 1984 as filed with the Commission pursuant to Rule 424(b)
under the Act.
3B Amendment No. 1 to the Partnership Agreement dated August 1, 1985 is
incorporated by reference to Exhibit 3B to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1985.
4 Certificate of Limited Partnership dated June 11, 1984 is incorporated
by reference to Exhibit 4 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1987.
4A Certificate of Amendment to Limited Partnership dated July 17, 1984 is
incorporated by reference to Exhibit 4A to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1987.
4B Restated Certificate of Limited Partnership dated October 5, 1984 is
incorporated by reference to Exhibit 4B to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1987.
10A Agent's Agreement dated October 16, 1984 by and among the Registrant
and Harvey Freeman & Sons, Inc. is incorporated by reference to
Exhibit 10B to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1984.
10B Agreement Among Agents dated October 16, 1984 by and among Harvey
Freeman & Sons, Inc., Harvey Freeman & Sons, Inc. of Arkansas, Harvey
Freeman & Sons, Inc. of Florida, Harvey Freeman & Sons, Inc. of
Georgia, Harvey Freeman & Sons, Inc. of Indiana, Harvey Freeman &
Sons, Inc. of Kentucky, Harvey Freeman & Sons, Inc. of Mississippi,
Harvey Freeman & Sons, Inc. of North Carolina, Harvey Freeman & Sons,
Inc. of Ohio and Harvey Freeman & Sons, Inc. of South Carolina is
incorporated by reference to Exhibit 10C to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1984.
10C Acquisition and Disposition Services Agreement dated October 16, 1984
between the Registrant and Criswell Freeman Company is incorporated by
reference to Exhibit 10D to the Registrant's Annual Report on Form 10-
K for the fiscal year ended December 31, 1984.
10D Purchase Agreement Phases I and II dated October 3, 1984 between NTS-
LaFontenay Partners and Tennessee Trust Company, Trustee, is
incorporated by reference to Exhibit 10E to Amendment No. 1 to the
Registrant's Registration Statement on Form S-11 (Registration No. 2-
92313) as filed on October 15, 1984.
10E Modification of Purchase Agreements dated October 31, 1984 by and
amount NTS-LaFontenay Partners, the Registrant and LaFontenay
Associates is incorporated by reference to Exhibit 10F to Post-
Effective Amendment No. 1 to the Registrant's Registration Statement
on Form S-11 (Registration No. 2-92313) as filed on January 15, 1985.
10F Contract for Sale of Real Estate for Outlets Ltd. Mall dated November
15, 1984 between Company Stores Development Corp. and Tennessee Trust
Company, as Trustee, is incorporated by reference to Exhibit 10G to
Post-Effective Amendment No. 1 to the Registrant's Registration
Statement on Form S-11 (Registration No. 2-92313) as filed on January
15, 1985.
10G Submanagement Agreement dated December 31, 1984 between Harvey Freeman
& Sons, Inc., Company Stores Management Corp. and the Registrant is
incorporated by reference to Exhibit 10H to Post-Effective Amendment
No. 1 to the Registrant's Registration Statement on Form S-11
(Registration No. 2-92313) as filed on January 15, 1985.
10H Assignment of Purchase Agreement dated October 25, 1984 between
Tennessee Trust Company, Trustee, and the Registrant relating to
assignment of Purchase Agreement for LaFontenay Apartments is
incorporated by reference to Exhibit 10I to Post-Effective Amendment
No. 1 to the Registrant's Registration Statement on Form S-11
(Registration No. 2-92313) as filed on January 15, 1985.
10I Contract for Sale of Real Estate for Big Walnut Apartments dated
December 6, 1984 between Community Development Company, an Ohio
limited partnership and Tennessee Trust Company, as Trustee, is
incorporated by reference to Exhibit 10(b) to the Registrant's Current
Report on Form 8-K dated March 28, 1985.
10J Assignment of Contract for Sale of Real Estate dated March 22, 1985
between Tennessee Trust Company, Trustee, and the Registrant, relating
to assignment of Purchase Agreement for Big Walnut Apartments is
incorporated by reference to Exhibit 10(a) to the Registrant's Current
Report on Form 8-K dated march 28, 1985.
10K Contract for Sale of Real Estate for the Trails Apartments dated July
31, 1985 between Trails of Nashville Associates, Ltd., a Tennessee
limited partnership by reference to Exhibit 10(b) to the Registrant's
Current Report on Form 8-K dated August 30, 1985.
10L Assignment of Contract for Sale of Real Estate dated August 28, 1985
between Tennessee Trust Company, as Trustee and the Registrant,
relating to assignment of Contract for Sale of Real Estate for The
Trails Apartments is incorporated by reference to Exhibit 10(a) to the
Registrant's Current Report on Form 8-K dated August 30, 1985.
10M Contract for Sale of Real Estate for Greenspring Manor Apartments
dated July 15, 1985 between Greenspring Apartments Associates, an
Indiana limited partnership and Tennessee Trust Company, as Trustee,
is incorporated by reference to Exhibit 20(d) to the Registrant's
current Report on Form 8-K dated August 30, 1985.
10N Assignment of Contract for Sale of Real Estate dated August 28, 1985
between Tennessee Trust Company, as Trustee and the Registrant,
relating to assignment of Contract for Sale of Real Estate for
Greenspring Manor apartments is incorporated by reference to Exhibit
10(c) to the Registrant's Current Report on Form 8-K dated August 30,
1985.
10O Tennessee Note dated September 25, 1980 executed by Company Stores
Development Corp. payable to TVB Mortgage Corporation relating to
Outlets, Ltd. Mall is incorporated by reference to Exhibit 10GG to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1985.
10P Deed of Trust and Security Agreement dated September 25, 1980 between
Company Stores Development Corp. and TVB Mortgage Corporation relating
to Outlets, Ltd. Mall is incorporated by reference to Exhibit 10HH to
the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1985.
10Q Note secured by Real Estate dated October 21, 1985 payable to First
American National Bank of Nashville executed by the Registrant
relating to Outlet's, Ltd. Mall is incorporated by reference to
Exhibit 10II to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1985.
10R Deed of Trust and Security Agreement dated October 21, 1985 executed
by the Registrant in favor of First American National Bank of
Nashville relating to Outlet's Ltd. Mall is incorporated by reference
to Exhibit 10EE to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1986.
10S Mortgage Note dated March 27, 1985 executed by the Registrant payable
to The Great-West Life Assurance Company relating to Big Walnut
Apartments is incorporated by reference to Exhibit 10KK to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1985.
10T Mortgage and Security Agreement dated March 27, 1985 between the
Registrant and The Great-West Life Assurance company relating to Big
Walnut Apartments is incorporated by reference to Exhibit 10Ll to the
Registrant's annual Report on Form 10-K for the fiscal year ended
December 31, 1985.
10U Mortgage Note dated March 27, 1985, executed by the Registrant payable
to BANCOhio National Bank relating to Big Walnut Apartments is
incorporated by reference to Exhibit 10MM to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1985.
10V Open-End Mortgage and Security Agreement dated March 27, 1985 between
the Registrant and BANCOhio National Bank relating to Big Walnut
Apartments is incorporated by reference to Exhibit 10NN to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1985.
10W Deed of Trust and Security Agreement dated December 1, 1984 between
Trails of Nashville Associates, Ltd., and Capital Holding Corporation
relating to The Trails Apartments is incorporated by reference to
Exhibit 10QQ to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1985.
10X Note dated December 28, 1984 executed by Trails of Nashville
Associates, Ltd., payable to The Industrial Development Board of the
Metropolitan Government of Nashville and Davidson County relating to
The Trails Apartments is incorporated by reference to Exhibit 10RR to
the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1985.
10Y Wraparound Mortgage Note dated September 30, 1985 payable to
Greenspring Apartments Associates executed by the Registrant relating
to Greenspring Manor Apartments is incorporated by reference to
Exhibit 10SS to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1985.
10Z Wraparound Mortgage Note dated September 30, 1985 between Green Spring
Apartments Associates and the Registrant relating to Green Spring
Manor apartments is incorporated by reference to Exhibit 10TT to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1985.
10AA Memorandum of Understanding among SEC Realty Corp., Tennessee
Properties, L.P., Freeman Mortgage Corporation, J. Richard Freeman, W.
Criswell Freeman and Jacques-Miller Properties, Inc. is incorporated
by reference to Exhibit 10DDD to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1988.
10BB Partnership Administration and Consultation Agreement among Freeman
Properties, Inc., Freeman Diversified Properties, Inc., Residual
Equities Limited and Jacques-Miller Properties, Inc. is incorporated
by reference to Exhibit 10EEE to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1988.
10CC Partnership Agreement of La Fontenay, L.P. dated May 15, 1990 owned
99.9% by the Registrant relating to refinancing of La Fontenay
Apartments is incorporated by reference to Exhibit 10FFF to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1990.
10DD Multifamily Note with Addendum dated May 24, 1990 executed by La
Fontenay, L.P. payable to the Patrician Mortgage Company relating to
La Fontenay Apartments is incorporated by reference to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1990.
10EE Multifamily Mortgage with Rider dated May 24, 1990 executed by La
Fontenay, L.P. in favor of the Patrician Mortgage Company relating to
LaFontenay Apartments is incorporated by reference to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1990.
10FF Termination Agreement, dated December 31, 1991 among Jacques-Miller,
Inc., Jacques-Miller Property Management, Davidson Diversified
Properties, Inc., and Supar, Inc. is incorporated by reference to
Exhibit 10JJJ to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991.
10GG Assignment of Limited Partnership Interest of Freeman Equities,
Limited, dated December 31, 1991 between Davidson Diversified
properties, Inc. and Insignia Jacques-Miller, L.P. is incorporated by
reference to Exhibit 10KKK to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1991.
10HH Assignment of General Partner Interests of Freeman Equities, Limited,
dated December 31, 1991 between Davidson Diversified Properties, Inc.
and MAE GP Corporation is incorporated by reference to Exhibit 10LLL
to the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1991.
10II Stock certificate, dated December 31, 1991 showing ownership of 1,000
shares of Davidson Diversified Properties, Inc. by MAE GP Corporation
is incorporated by reference to Exhibit 10MMM to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1991.
10JJ (a) First Deeds of Trust and Security Agreements dated October 28, 1992
between Big Walnut, L.P. and First Commonwealth Realty Credit
Corporation, a Virginia Corporation, securing Greensprings Manor is
incorporated by reference to Exhibit 10JJ (a) to the Registrant's
Annual Report on Form 10-KSB for the fiscal year ended December 31,
1992.
(b) Second Deeds of Trust and Security Agreements dated October 28, 1992
between Big Walnut, L.P. and First Commonwealth Realty Credit
Corporation, a Virginia Corporation, securing Greensprings Manor is
incorporated by reference to Exhibit 10JJ (b) to the Registrant's
Annual Report on Form 10-KSB for the fiscal year ended December 31,
1992.
(c) First Assignments of Leases and Rents dated October 28, 1992 between
Big Walnut, L.P. and First Commonwealth Realty Credit Corporation, a
Virginia Corporation, securing Greensprings Manor is incorporated by
reference to Exhibit 10JJ (c) to the Registrant's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1992.
(d) Second Assignments of Leases and Rents dated October 28, 1992 between
Big Walnut, L.P. and First Commonwealth Realty Credit Corporation, a
Virginia Corporation, securing Greensprings Manor is incorporated by
reference to Exhibit 10JJ (d) to the Registrant's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1992.
(e) First Deeds of Trust Notes dated October 28, 1992 between Big Walnut,
L.P. and First Commonwealth Realty Credit Corporation, relating to
Greensprings Manor is incorporated by reference to Exhibit 10JJ (e)
to the Registrant's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1992.
(f) Second Deeds of Trust Notes dated October 28, 1992 between Big
Walnut, L.P. and First Commonwealth Realty Credit Corporation,
relating to Greensprings Manor is incorporated by reference to
Exhibit 10JJ (f) to the Registrant's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1992.
10KK (a) First Deeds of Trust and Security Agreements dated October 28, 1992
between Big Walnut, L.P. and First Commonwealth Realty Credit
Corporation, a Virginia Corporation, securing Big Walnut is
incorporated by reference to Exhibit 10KK (a) to the Registrant's
Annual Report on Form 10-KSB for the fiscal year ended December 31,
1992.
(b) Second Deeds of Trust and Security Agreements dated October 28, 1992
between Big Walnut, L.P. and First Commonwealth Realty Credit
Corporation, a Virginia Corporation, securing Big Walnut is
incorporated by reference to Exhibit 10KK (b) to the Registrant's
Annual Report on Form 10-KSB for the fiscal year ended December 31,
1992.
(c) First Assignments of Leases and Rents dated October 28, 1992 between
Big Walnut, L.P. and First Commonwealth Realty Credit Corporation, a
Virginia Corporation, securing Big Walnut is incorporated by
reference to Exhibit 10KK (c) to the Registrant's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1992.
(d) Second Assignments of Leases and Rents dated October 28, 1992 between
Big Walnut, L.P. and First Commonwealth Realty Credit Corporation, a
Virginia Corporation, securing Big Walnut is incorporated by
reference to Exhibit 10KK (d) to the Registrant's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1992.
(e) First Deeds of Trust Notes dated October 28, 1992 between Big Walnut,
L.P. and First Commonwealth Realty Credit Corporation, relating to
Big Walnut is incorporated by reference to Exhibit 10KK (e) to the
Registrant's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1992.
(f) Second Deeds of Trust Notes dated October 28, 1992 between Big
Walnut, L.P. and First Commonwealth Realty Credit Corporation,
relating to Big Walnut is incorporated by reference to Exhibit 10KK
(f) to the Registrant's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1992.
10LL (a) Loan Agreement dated June 30, 1993 between Outlet's Mall, L.P. and
First American National Bank setting forth the terms and conditions
of the loan, as a condition of extending the maturity date.
(b) Renewal Note Secured by Real Estate dated June 30, 1993 between
Outlet's Mall, L.P. and First American National Bank to extend the
maturity date of the loan until April 1, 1995.
(c) Loan Modification and Agreement dated January 18, 1995 between
Outlet's Mall, L.P. and First American National Bank setting forth
the new terms and conditions of the loan.
16 Letter from the Registrant's former independent accountant regarding its
concurrence with the statements made by the Registrant is incorporated by
reference to the exhibit filed with Form 8-K dated September 30, 1992.
27 Financial Data Schedule
99A Agreement of Limited Partnership for Big Walnut, L.P. between Davidson
Diversified Properties, Inc. and Davidson Diversified Real Estate II, L.P.
entered into on August 23, 1991 is incorporated by reference to Exhibit 99A
to the Registrant's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1992.
99B Agreement of Limited Partnership for Outlet's Mall, L.P. between Outlet's
Mall GP Limited Partnership and Davidson Diversified Real Estate II, L.P. is
incorporated by reference to Exhibit 99B to the Registrant's Annual Report
on Form 10-KSB for the fiscal year ended December 31, 1992.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Davidson
Diversified Real Estate II, L.P.'s 1995 Year-End 10-KSB and is qualified in its
entirety by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000750258
<NAME> DAVIDSON DIVERSIFIED REAL ESTATE II
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 714,045
<SECURITIES> 0
<RECEIVABLES> 74,368
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 42,854,271
<DEPRECIATION> (17,512,566)
<TOTAL-ASSETS> 27,799,504
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 26,963,761
0
0
<COMMON> 0
<OTHER-SE> (337,359)
<TOTAL-LIABILITY-AND-EQUITY> 27,799,504
<SALES> 0
<TOTAL-REVENUES> 8,614,987
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,776,073
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,545,942
<INCOME-PRETAX> (179,926)
<INCOME-TAX> 0
<INCOME-CONTINUING> (179,926)
<DISCONTINUED> 0
<EXTRAORDINARY> (32,181)
<CHANGES> 0
<NET-INCOME> (212,107)
<EPS-PRIMARY> (169.79)
<EPS-DILUTED> 0
<FN>
<F1>The Partnership has an unclassified balance sheet.
</FN>
</TABLE>
