FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
(As last amended by 34-32231, eff. 6/3/93.)
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from.........to.........
Commission file number 0-14530
DAVIDSON INCOME REAL ESTATE, L.P.
(Exact name of small business issuer as specified in its charter)
Delaware 62-1242144
(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
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) DAVIDSON INCOME REAL ESTATE, L.P.
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 1996
Assets
Cash and cash equivalents:
Unrestricted $ 620
Restricted--tenant security deposits 115
Accounts receivable 10
Escrows for taxes 183
Restricted escrows 217
Other assets 342
Investment properties:
Land $ 4,120
Buildings and related personal property 19,583
23,703
Less accumulated depreciation (8,822) 14,881
Investment in Joint Venture 352
$16,720
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 46
Tenant security deposits 114
Accrued taxes 226
Other liabilities 145
Mortgage notes payable 11,871
Partners' Capital (Deficit)
General partners $ (640)
Limited partners (26,776 units
issued and outstanding) 4,958 4,318
$16,720
See Accompanying Notes to Consolidated Financial Statements
b) DAVIDSON INCOME REAL ESTATE, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 1,114 $ 1,053 $ 2,241 $ 2,093
Other income 62 55 122 110
Total revenues 1,176 1,108 2,363 2,203
Expenses:
Operating 380 372 761 712
General and administrative 55 66 112 115
Maintenance 137 117 264 236
Depreciation 211 193 417 384
Interest 284 286 569 573
Property taxes 113 106 225 213
Total expenses 1,180 1,140 2,348 2,233
Equity in income of
joint venture 20 14 34 32
Net income (loss) $ 16 $ (18) $ 49 $ 2
Net income (loss) allocated
to general partners (3%) $ -- $ (1) $ 1 $ --
Net income (loss) allocated
to limited partners (97%) 16 (17) 48 2
$ 16 $ (18) $ 49 $ 2
Net income (loss) per limited
partnership unit $ .59 $ (.65) $ 1.78 $ .07
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
c) DAVIDSON INCOME REAL ESTATE, L.P.
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partners Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 26,776 $ 1 $ 26,776 $ 26,777
Partners' capital (deficit)
at December 31, 1995 26,776 $ (633) $ 5,182 $ 4,549
Distributions paid to partners (8) (272) (280)
Net income for the six months
ended June 30, 1996 1 48 49
Partners' capital (deficit)
at June 30, 1996 26,776 $ (640) $ 4,958 $ 4,318
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) DAVIDSON INCOME REAL ESTATE, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 49 $ 2
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 417 384
Amortization of discounts and loan costs 41 39
Equity in income of joint venture (34) (32)
Change in accounts:
Restricted cash (12) (9)
Accounts receivable -- 1
Escrows for taxes 98 174
Other assets (44) 6
Accounts payable (157) (62)
Tenant security deposit liabilities 11 (134)
Accrued taxes (68) 7
Other liabilities 8 (61)
Net cash provided by operating activities 309 315
Cash flows from investing activities:
Property improvements and replacements (246) (107)
Deposits to restricted escrows (5) (7)
Receipts from restricted escrows 47 27
Distributions from joint venture 7 158
Net cash used in (provided by) investing activities (197) 71
Cash flows from financing activities:
Payments on mortgage notes payable (72) (69)
Distributions paid to partners (280) (200)
Additional loan costs (16) --
Net cash used in financing activities (368) (269)
Net (decrease) increase in cash and cash equivalents (256) 117
Cash and cash equivalents at beginning of period 876 1,147
Cash and cash equivalents at end of period $ 620 $ 1,264
Supplemental disclosure of cash flow information:
Cash paid for interest $ 494 $ 534
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
e) DAVIDSON INCOME REAL ESTATE, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Davidson Income Real Estate,
L.P. (the "Partnership") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of the Managing General Partner, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
accepted accounting principles for interim financial information and with the
included. Operating results for the six month period ended June 30, 1996, are
not necessarily indicative of the results that may be expected for the fiscal
year ending December 31, 1996. For further information, refer to the financial
statements and footnotes thereto included in the Partnership's annual report on
Form 10-KSB for the year ended December 31, 1995.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
partnership activities. The Partnership Agreement provides for payments to
affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. Balances and other transactions with
Insignia Financial Group, Inc. and affiliates in 1996 and 1995 are as follows:
Six Months Ended
June 30,
1996 1995
(in thousands)
Property management fees $116 $109
Reimbursement for services of affiliates 67 81
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 C - SUBSEQUENT EVENT
Lakeside Apartments' mortgage indebtedness of approximately $3,812,000 matured
July 1, 1996. The principal and accrued interest of approximately $3,846,000
was refinanced through a temporary bridge loan on July 1, 1996. The Partnership
negotiated the temporary bridge loan in the amount of approximately $4,100,000
with Lehman Brothers Holding Inc., which matures on September 1, 1996, with a
possible extension to October 1, 1996. The loan has a floating interest rate
with a rate of 8% at July 1, 1996. The first interest only payment is due
August 1, 1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of four apartment complexes.
The following table sets forth the average occupancy of the properties for the
six months ended June 30, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Northsprings Apartments
Atlanta, Georgia 97% 96%
Lakeside Apartments
Charlotte, North Carolina 97% 97%
Bexley House Apartments
Columbus, Ohio 96% 90%
Covington Pointe Apartments
Dallas, Texas 96% 88%
The increase in occupancy at Bexley House is attributed to property improvements
and an increase in services provided to the tenants. The increase in occupancy
at Covington Pointe is attributed to an increase in services provided to the
tenants and a change in property management personnel.
The Partnership's net income for the six months ended June 30, 1996, was
approximately $49,000, with the second quarter having income of approximately
$16,000. The Partnership reported net income of approximately $2,000 and a loss
of approximately $18,000 for the corresponding periods in 1995. The increase in
net income is primarily attributable to increased rental income as a result of
monthly rental rate increases at all properties and increases in occupancy at
Bexley House of 6%, Covington Pointe of 8% and North Springs Apartments of 1% as
discussed in the previous paragraph. Other income has also increased as a
result of increased utility collections at Bexley House and increased legal and
lease cancellation fees at Covington Pointe Apartments due to an increase in
tenant turnover. Partially offsetting the increase in net income was an
increase in maintenance expense of approximately $20,000 and $28,000 for the
three and six months ended June 30, 1996, which was performed to increase
occupancy at the Partnership's investment properties.
The Partnership owns 17.5% of Sterling Crest Joint Venture. Equity in the
income of the joint venture increased approximately $6,000 and $2,000 for the
three and six months ended June 30, 1996, as a result of an increase in the net
income of Sterling Crest Joint Venture's investment property, Brighton Crest.
The increase in net income was due to an increase in rental rates which was
partially offset by an increase in operating expense. Operating expense
increased due to advertising costs associated with the efforts to increase
occupancy.
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
expense. 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.
The Partnership had unrestricted cash of $620,000 at June 30, 1996, versus
$1,264,000 at June 30, 1995. Net cash provided by operating activities
decreased as a result of the increase in cash used for accounts payable due to
the timing of payments to vendors. Also, other liabilities increased due to an
increase in prepaid rents which resulted in a source of cash in 1996. Net cash
used in investing activities increased primarily as a result of an increase in
property improvements and replacements and a decrease in distributions from the
joint venture. Offsetting these changes, net receipts from restricted escrows
increased in 1996 due to property improvements and replacements at North
Springs. Net cash used in financing activities increased due to an increase in
distributions during 1996. The Partnership also incurred loan costs due to the
refinancing of Lakeside Apartment's mortgage in July.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and other operating needs of the Partnership. Such assets are currently thought
to be sufficient for any near-term needs of the Partnership. The mortgage
indebtedness of $11,871,000, net of discount, is amortized over varying periods
with required balloon payments ranging from July 1996 to October 2003, at which
time the properties will either be refinanced or sold. Lakeside Apartments'
mortgage indebtedness of approximately $3,812,000 matured July 1, 1996. The
principal and accrued interest of approximately $3,846,000 was refinanced
through a temporary bridge loan on July 1, 1996. The Partnership negotiated the
temporary bridge loan in the amount of approximately $4,100,000 with Lehman
Brothers Holding Inc., which matures on September 1, 1996, with a possible
extension to October 1, 1996. The loan has a floating interest rate with a rate
of 8% at July 1, 1996. The first interest only payment is due August 1, 1996.
Future cash distributions will depend on the levels of net cash generated from
operations, capital expenditure requirements, property sales and the
availability of cash reserves. Distributions to partners during 1996 and 1995
were $280,000 and $200,000, respectively.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K:
None filed during the quarter ended June 30, 1996.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DAVIDSON INCOME REAL ESTATE, L.P.
By: DAVIDSON DIVERSIFIED PROPERTIES, INC.,
as Managing General Partner
By:/s/ Carroll D. Vinson
Carroll D. Vinson
President
By:/s/ Robert D. Long, Jr.
Robert D. Long, Jr.
Vice President/CAO
Date: January 10, 1997
