FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT UNDER
SECTION 13 OR 15(d)
(As last amended by 34-31905, eff. 4/26/93)
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [No Fee Required]
For the fiscal year ended December 31, 1996
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 0-14530
DAVIDSON INCOME REAL ESTATE, L.P.
(Name of small business issuer 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
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. $ 4,709,000
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, 1996. Market Value information for the
Registrant's partnership interests is not available. Should a trading market
develop for these interest, 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 July 26, 1985 (included in
Registration Statement, No. 2-97539, of Registrant) are incorporated by
reference into Parts I and III.
PART I
Item 1. Description of Business
Davidson Income Real Estate, L.P. (the "Registrant" or "Partnership") is a
Delaware limited partnership organized in April 1985. The general partners of
the Registrant are Davidson Diversified Properties, Inc., a Tennessee
corporation ("Managing General Partner"), David W. Talley and James T. Gunn
(collectively, "Individual General Partners") (collectively, the "General
Partners").
The offering of the Registrant's limited partnership units ("Units") commenced
on July 26, 1985, and terminated on May 30, 1986. The Registrant received gross
proceeds from the offering of $26,776,000 and net proceeds of $25,700,160.
The Registrant's primary business is to acquire, operate and hold existing,
income-producing residential and commercial real estate properties. 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 four
properties and in a 17.5% joint venture interest which owns one property. See
"Item 2. Description of Properties," below for a description of the Registrant's
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 of the control of the Registrant.
A further description of the Partnership's business is included in "Management's
Discussion and Analysis or Plan of Operation" included in "Item 6" of this form
10-KSB.
The Registrant has no employees. Management and administrative services are
performed by the Managing General Partner and by Insignia Residential Group,
L.P., an affiliate of Insignia Financial Group, Inc. ("Insignia"). Effective
January 1, 1992, affiliates of Insignia began to provide partnership
administration, asset management, and investor services for the Partnership.
See "Item 12. Certain Relationships and Related Transactions" for an enumeration
of the affiliates and the compensation and reimbursement received from the
Registrant during 1996 and 1995.
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 tables set forth the Registrant's investments in properties:
Date of
Property Purchase Type of Ownership Use
Northsprings Apartments 11/13/85 Fee ownership subject Apartment
Atlanta, Georgia to first and second 120 units
mortgages.
Lakeside Apartments 05/20/86 Fee ownership subject Apartment
Charlotte, North Carolina to first mortgage. 216 units
Bexley House Apartments 09/30/86 Fee ownership subject Apartment
Columbus, Ohio to first and second 64 units
mortgages.
Covington Pointe 03/10/87 Fee ownership subject Apartment
Apartments to first and second 180 units
Dallas, Texas mortgages.
Brighton Crest Apartments Phase I Registrant has a 17.5% Apartment
Marietta, Georgia 06/30/87 interest in the Joint 320 units
Venture which has fee
Phase II ownership subject to
12/15/87 first and second
mortgages.
Schedule of Properties:
(dollar amounts in thousands)
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
Northsprings $ 4,624 $1,974 5-25 yrs S/L $ 3,777
Lakeside 6,367 2,632 5-25 yrs S/L 4,960
Bexley House 3,601 1,383 5-25 yrs S/L 2,876
Covington Pointe 9,321 3,266 5-25 yrs S/L 6,902
$23,913 $9,255 $18,515
See "Note A" to the financial statements included in "Item 7" for a description
of the Partnership's depreciation policy.
Schedule of Mortgages:
(dollar amounts in thousands)
Principal Principal
Balance At Stated Balance
December 31, Interest Period Maturity Due At
Property 1996 Rate Amortized Date Maturity
Northsprings
1st mortgage $ 1,912 7.83% 28.67 yrs 10/15/03 $1,701
2nd mortgage 61 7.83% (1) 10/15/03 61
Lakeside
1st mortgage 4,100 7.33% (1) 11/01/03 4,100
Bexley House
1st mortgage 1,330 7.60% 21.40 yrs 11/15/02 1,052
2nd mortgage 45 7.60% (1) 11/15/02 45
Covington Pointe
1st mortgage 4,685 7.83% 28.67 yrs 10/15/03 4,169
2nd mortgage 150 7.83% (1) 10/15/03 150
Total 12,283
Less unamortized
discounts (171)
$12,112
(1) Interest only payments.
Average annual rental rate and occupancy for 1996 and 1995 for each property:
Average Annual Average
Rental Rates Per Unit Occupancy
Property 1996 1995 1996 1995
Northsprings $ 9,008 $8,331 96% 96%
Lakeside 6,021 5,711 95% 97%
Bexley House 11,076 11,113 97% 91%
Covington Pointe 9,192 9,084 92% 91%
The Managing General Partner attributes the increase in occupancy at Bexley
House Apartments to property improvements and an increase in services provided
to the tenants.
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 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 rental
space.
Real estate taxes and rates in 1996 for each property were (in thousands):
1996 1996
Billing Rate
Northsprings $ 70 4.03
Lakeside 81 1.37
Bexley House 85 8.12
Covington Pointe 211 2.59
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 matters will be resolved without a material adverse effect upon
the Partnership's financial condition, results of operations, or liquidity.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of 1996, no matter was submitted to a vote of security
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, 1996, there are 3,123
holders of record owning an aggregate of 26,776 units. No public trading has
developed for the Units, and it is not anticipated that such a market will
develop in the future. Distributions of approximately $480,000 were made in 1996
while distributions of approximately $601,000 were made during 1995. Future
distributions will depend on the levels of cash generated from operations,
refinancings, property sales and the availability of cash reserves.
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.
Item 6. Management's Discussion and Analysis or Plan of Operation
Results of Operations
The Partnership's net income for the year ended December 31, 1996, was
approximately $42,000 compared to a net loss of approximately $216,000 for the
corresponding period of 1995. The increase in net income is primarily
attributable to increased rental income as a result of monthly rental rate
increases at Northsprings, Lakeside and Covington and increases in occupancy at
Bexley House, and Covington Pointe. Also contributing to the increase in net
income was a decrease in maintenance expense and loss on disposal of property.
Maintenance expense decreased as a result of major landscaping projects
completed at Lakeside and Northsprings Apartments in 1995. Additionally,
maintenance expense decreased as a result of an asbestos abatement project
completed at Northsprings in 1995. Also, an exterior painting project was
completed at Bexley House in 1995. Included in maintenance expense in 1996 is
approximately $78,000 of major repairs and maintenance comprised primarily of
major landscaping, parking lot repairs and exterior building repairs. Loss on
the disposal of property decreased as a result of the completion of roof
replacements at Northsprings and Lakeside Apartments in 1995.
The Partnership owns 17.5% of Sterling Crest Joint Venture. Equity in the
income of the joint venture increased 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 and an
increase in corporate unit income which stemmed from additional rents to patrons
of the Olympic games. Operating expense increased due to higher utilities and
corporate unit expense related to the additional rents.
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.
Liquidity and Capital Resources
At December 31, 1996, the Partnership had unrestricted cash of approximately
$655,000 compared to approximately $876,000 at December 31, 1995. Net cash
provided by operating activities increased as a result of the increase in net
income as discussed above. Offsetting the increase in cash provided by operating
activities was an increase in cash used for accounts payable due to timing of
payments to vendors. Net cash used in investing activities increased primarily
as a result of an increase in property improvements and replacements, an
increase in deposits to restricted escrows and a decrease in distributions from
the joint venture. Net cash used in financing activities decreased due to the
refinancing of Lakeside Apartments in 1996, which resulted in net proceeds to
the Partnership, and a decrease in distributions to partners in 1996.
The Partnership has no material capital programs scheduled to be performed in
1997, although certain routine capital expenditures and maintenance expenses
have been budgeted. These capital expenditures and maintenance expenses will be
incurred only if cash is available from operations or is received from the
capital reserve accounts.
On November 13, 1996, the Partnership successfully refinanced Lakeside
Apartments. The Partnership received $4.1 million in gross proceeds from the
financing. The mortgage note requires monthly interest only payments at a
stated interest rate of 7.33% and has a balloon payment due November 1, 2003.
The Partnership retired debt of approximately $3,812,000 which had a stated
interest rate of 10.75% and matured on July 1, 1996. Bridge loans were obtained
until the permanent refinancing was finalized.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership. Such assets are currently
thought to be sufficient for any near-term needs of the Partnership. The
mortgage indebtedness of approximately $12,112,000, net of discount, is
amortized over varying periods with required balloon payments ranging from
November 2002, to November 2003, at which time the properties will either be
refinanced or sold. Distributions paid to partners during the years ended
December 31, 1996 and 1995, were approximately $480,000 and $601,000. 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.
Item 7. Financial Statements
DAVIDSON INCOME REAL ESTATE LIMITED PARTNERSHIP
LIST OF CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors
Consolidated Balance Sheet - December 31, 1996
Consolidated Statements of Operations - Years ended December 31, 1996
and 1995
Consolidated Statements of Changes in Partners' Capital (Deficit) - Years
ended December 31, 1996 and 1995
Consolidated Statements of Cash Flows - Years ended December 31, 1996
and 1995
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors
The Partners
Davidson Income Real Estate, L.P.
We have audited the accompanying consolidated balance sheet of Davidson Income
Real Estate, L.P. (A Limited Partnership) as of December 31, 1996, and the
related consolidated statements of operations, changes in partners' capital
(deficit) and cash flows for each of the two years in the period ended
December 31, 1996. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally 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
Partnership's management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Davidson Income Real Estate, L.P. (A Limited Partnership) as of December 31,
1996, and the consolidated results of its operations and its cash flows for each
of the two years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ERNST & YOUNG LLP
Greenville, South Carolina
February 5, 1997
DAVIDSON INCOME REAL ESTATE LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
December 31, 1996
(in thousands, except unit data)
Assets
Cash and cash equivalents:
Unrestricted $ 655
Restricted--tenant security deposits 101
Accounts receivable 20
Escrow for taxes 272
Restricted escrows 410
Other assets 375
Investment properties:
Land $ 4,120
Buildings and related personal property 19,793
23,913
Less accumulated depreciation (9,255) 14,658
Investment in Joint Venture 291
$16,782
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 63
Tenant security deposits 101
Accrued taxes 297
Other liabilities 98
Mortgage notes payable 12,112
Partners' Capital (Deficit)
General partners $ (645)
Limited partners (26,776 units
issued and outstanding) 4,756 4,111
$16,782
See Accompanying Notes to Consolidated Financial Statements
DAVIDSON INCOME REAL ESTATE LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
Years Ended December 31,
1996 1995
Revenues:
Rental income $ 4,459 $ 4,268
Other income 250 239
Total revenues 4,709 4,507
Expenses:
Operating 1,518 1,434
General and administrative 234 240
Maintenance 587 657
Depreciation 850 782
Interest 1,084 1,145
Property taxes 472 433
Loss on disposal of property -- 89
Total expenses 4,745 4,780
Equity in income of joint venture 78 57
Net income (loss) $ 42 $ (216)
Net income (loss) allocated to general partners (3%) $ 1 $ (6)
Net income (loss) allocated to limited partners (97%) 41 (210)
$ 42 $ (216)
Net income (loss) per limited partnership unit $ 1.54 $ (7.84)
See Accompanying Notes to Consolidated Financial Statements
DAVIDSON INCOME REAL ESTATE LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital
contributions 26,776 $ 1 $26,776 $26,777
Partners' capital (deficit)
at December 31, 1994 26,776 $(608) $ 5,974 $ 5,366
Distribution paid
to partners (18) (583) (601)
Net loss for the year
ended December 31, 1995 (6) (210) (216)
Partners' capital (deficit)
at December 31, 1995 26,776 (632) 5,181 4,549
Distributions paid
to partners (14) (466) (480)
Net income for the year
ended December 31, 1996 1 41 42
Partners' capital (deficit)
at December 31, 1996 26,776 $(645) $ 4,756 $ 4,111
See Accompanying Notes to Consolidated Financial Statements
DAVIDSON INCOME REAL ESTATE LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
1996 1995
Cash flows from operating activities:
Net income (loss) $ 42 $ (216)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 850 782
Amortization of discounts and loan costs 74 80
Equity in income of joint venture (78) (57)
Loss on disposition of property -- 89
Change in accounts:
Restricted cash 2 (19)
Accounts receivable (10) (4)
Escrow for taxes 9 77
Other assets (3) --
Accounts payable (32) (20)
Accrued property taxes 3 (51)
Tenant security deposit liabilities (1) 16
Other liabilities (42) (23)
Net cash provided by operating activities 814 654
Cash flows from investing activities:
Property improvements and replacements (565) (374)
Deposits to restricted escrows (213) (10)
Receipts from restricted escrows 62 25
Distributions from joint venture 112 175
Net cash used in investing activities (604) (184)
Cash flows from financing activities:
Payments on mortgage notes payable (130) (140)
Distributions paid (480) (601)
Proceeds from long-term borrowings 4,100 --
Repayment of mortgage notes payable (3,812) --
Loan costs (109) --
Net cash used in financing activities (431) (741)
Net decrease in cash (221) (271)
Unrestricted cash and cash equivalents
at beginning of period 876 1,147
Unrestricted cash and cash equivalents
at end of period $ 655 $ 876
Supplemental disclosure of cash flow information:
Cash paid for interest $ 986 $1,065
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY
Property improvements and replacements
Accounts payable was adjusted approximately $108,000 at December 31, 1995, for
non-cash amounts in connection with property improvements and replacements.
See Accompanying Notes to Consolidated Financial Statements
DAVIDSON INCOME REAL ESTATE LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
December 31, 1996
Note A - Organization and Significant Accounting Policies
Organization: Davidson Income Real Estate, L.P. (the "Partnership" or
"Registrant") is a Delaware limited partnership organized in April 1985, to
acquire and operate residential and commercial real estate properties. The
General Partners of the Registrant are Davidson Diversified Properties, Inc., a
Tennessee corporation ("Managing General Partner"), David W. Talley and James T.
Gunn (collectively, "Individual General Partners") (collectively, the "General
Partners"). The Partnership owns and operates four apartment properties located
in the Mid-West, South and Southeast.
Principles of Consolidation: The financial statements of the Partnership
include all of the accounts of the Partnership, Bexley House, L.P., and Davidson
IRE Associates, L.P. The Partnership owns 99.99% of Bexley House, L.P., and
99.99% of Davidson IRE Associates, L.P. All significant interpartnership
balances have been eliminated.
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.
Allocations to Partners: Net income (loss) of the Partnership and taxable
income (loss) are allocated 97% to the limited partners and 3% to the general
partners. Distributions from distributable cash from operations are allocated
among the limited partners and the general partners in accordance with the
agreement of limited partnership. Distributions of cash from operations per
limited partnership unit were $17.40 and $21.76 for 1996 and 1995, respectively.
The weighted average number of limited partnership units outstanding for 1996
and 1995 was 26,776 units.
Net income (loss) of the Partnership and taxable income (loss) are allocated 97%
to the limited partners and 3% to the general partners, except for such amounts
which are allocated prior to the Partnership meeting the minimum close
requirements as defined in the partnership agreement. Distributions of
available cash from operations are allocated 97% to the limited partners and 3%
to the general partners. Cash from sales or refinancing are allocated 97% to
limited partners and 3% to general partners until the limited partners have
received an amount of cumulative distributions from sales or refinancings that
equal original invested capital plus an amount which, when added to the prior
distributions to limited partners will equal 12% per annum cumulative
noncompounded on Adjusted Invested Capital, as defined in the agreement of
limited partnership. Thereafter, upon payment to an affiliate of the general
partners certain real estate commissions and incentive fees as described in the
limited partnership agreement, remaining cash from sales or refinancings are
allocated 97% to limited partners and 3% to general partners. In connection
with the liquidation of the Partnership, cash from sales or refinancings and any
remaining working capital reserves shall be allocated among, and distributed to,
the partners in proportion to, and to the extent of, their positive capital
account balances.
Restricted Escrows
Capital Improvement Reserves - At the time of the refinancing of
Northsprings in 1993, approximately $163,000 of the proceeds were designated for
"capital improvement escrows" for certain capital improvements. At December 31,
1996, Northsprings had an unexpended balance of approximately $11,000 for
capital improvements. Upon completion of scheduled property improvements, any
excess funds will be returned for property operations.
At the time of the refinancing of Bexley House Apartments' mortgage note payable
in 1992, $122,000 of the proceeds were designated for a "capital improvement
escrow" for certain capital improvements. At December 31, 1996, approximately
$3,000 remained in escrow for 1997 capital improvements of which any excess
funds will be returned for property operations.
At the time of the refinancing of Lakeside Apartments' mortgage note payable in
November 1996, approximately $198,000 of the proceeds were designated for a
"capital improvement escrow" for certain capital improvements. At December 31,
1996 approximately $203,000 remained in escrow for 1997 capital improvements of
which any excess funds will be returned for property operations.
Reserve Account - In addition to the Capital Improvement Reserves
established in the various refinancings, general reserve accounts of $48,000,
$72,000 and $64,000 on Northsprings, Covington Pointe and Bexley House,
respectively, were established with the refinancing and financing proceeds for
the properties involved. These funds were established to cover necessary
repairs and replacements of existing improvements, debt services, out-of-pocket
expenses incurred for ordinary and necessary administrative tasks, and payments
of real property taxes and insurance premiums. The Partnership was required to
deposit net operating income (as defined in the mortgage notes) from the
properties to the respective reserve accounts until the reserve accounts equaled
$400 per apartment unit or $48,000 for Northsprings and $72,000 for Covington
Pointe and $1,000 per apartment unit or $65,000 for Bexley House. At December
31, 1996, the account balances were approximately $53,000, $75,000 and $65,000,
respectively, which includes interest earned on these funds.
Escrows for Taxes: These escrows are held by the Partnership for Bexley House,
Covington Pointe, Northsprings and Lakeside. All escrow funds are designated
for the payment of real estate taxes.
Present Value Discounts: Periodically, the Partnership incurs debt at below
market rates for similar debt. Present value discounts are recorded on the
basis of prevailing market rates and are amortized on an interest method over
the life of the related debt. The amortization expense is included in interest
expense.
Investment Properties: 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 by the straight-line method over the
estimated lives of the investment 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.
Cash and Cash Equivalents:
Unrestricted Cash - The Partnership considers unrestricted cash and
certificates of deposit to be cash. At certain times, the amount of cash
deposited at a bank may exceed the limit on insured deposits.
Restricted Cash--Tenant Security Deposits - The Partnership requires
security deposits from all apartment lessees for the duration of the lease which
are considered to be restricted cash. Deposits are refunded when the tenant
vacates the apartment if there has been no damage to the unit.
Loan Costs: Loan costs of approximately $498,000, less accumulated amortization
of approximately $96,000 are included in other assets and are being amortized on
a straight-line basis over the life of the loans. The amortization expense is
included in interest expense. In connection with the refinancing of Lakeside
Apartments in November 1996, an additional $109,000 was capitalized.
Leases: The Partnership generally leases apartment units for twelve-month terms
or less. The Partnership recognizes income as earned on 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 one month free rent and variable move-in allowances. Concessions are
charged to expense as incurred.
Joint Venture: The Partnership accounts for its investment in Sterling Crest
Joint Venture using the equity method of accounting.
Advertising: The Partnership expenses the costs of advertising as incurred.
Advertising expense, included in operating expenses, was approximately $103,000
and $93,000 for the years ended December 31, 1996 and 1995, respectively.
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 mortgages by discounted cash flow analysis, based on estimated
borrowing rates currently available to the Partnership.
Reclassifications: Certain reclassifications have been made to the 1995
balances to conform to the 1996 presentation.
Note B - Investment in Joint Venture
The Partnership owns a 17.5% interest in Sterling Crest Joint Venture with
Davidson Growth Plus, L.P., an affiliate of the Managing General Partner which
owns the remaining 82.5% of the joint venture. In connection with the joint
venture's purchase of Phase I of Brighton Crest Apartments on June 30, 1987, the
Partnership invested approximately $2,727,000 in the joint venture. The joint
venture purchased Phase II of Brighton Crest Apartments on December 15, 1987.
Summary financial information for Sterling Crest Joint Venture is as follows (in
thousands):
December 31,
1996
Total assets $ 8,956
Total liabilities (6,709)
Total ventures' equity $ 2,247
1996
Total revenues $ 2,611
Total expenses (2,166)
$ 445
In 1996 and 1995, the Partnership received distributions of approximately
$112,000 and $175,000 respectively, from the Joint Venture. In 1996 and 1995,
the Partnership recognized equity in the income of the Joint Venture of
approximately $78,000 and $57,000, respectively.
Note C - Mortgage Notes Payable
The principal terms of the mortgage notes payable are as follows (in thousands):
Principal Monthly Principal
Balance At Payment Stated Balance
December 31, Including Interest Maturity Due At
Property 1996 Interest Rate Date Maturity
Northsprings
1st mortgage $ 1,912 $ 14 7.83% 10/15/03 $1,701
2nd mortgage 61 -- 7.83% 10/15/03 61
Lakeside 4,100 25 7.33% 11/01/03 4,100
Bexley House
1st mortgage 1,330 12 7.60% 11/15/02 1,052
2nd mortgage 45 -- 7.60% 11/15/02 45
Covington Pointe
1st mortgage 4,685 35 7.83% 10/15/03 4,169
2nd mortgage 150 1 7.83% 10/15/03 150
Total 12,283
Less unamortized
discounts (171)
$12,112
The estimated fair values of the Partnership's aggregate debt approximates its
carrying value. 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 mortgage notes payable are non-recourse and are secured by pledge of the
respective apartment properties and by pledge of revenues from the respective
apartment properties. Certain of the notes require prepayment penalties if
repaid prior to maturity and prohibit resale of the properties subject to
existing indebtedness.
The Partnership exercised interest rate buy-down options reducing the stated
rate from 8.76% to 7.60% for Bexley House and 8.13% to 7.83% for Northsprings
and Covington Pointe. The fees for the interest rate reductions were
approximately $243,000 and are being amortized as loan discounts using the
interest method over the life of the loans. The discount fees are reflected as a
reduction of the mortgage notes payable and increases the effective rate of the
debt to 8.76% for Bexley House and 8.13% for Northsprings and Covington Pointe.
On November 13, 1996, the Partnership successfully refinanced Lakeside
Apartments. The Partnership received $4.1 million in gross proceeds from the
financing. The mortgage note requires monthly interest only payments at a
stated interest rate of 7.33% and has a balloon payment due November 1, 2003.
The Partnership retired debt of approximately $3,812,000 which had a stated
interest rate of 10.75% and matured on July 1, 1996. Bridge loans were obtained
until the permanent refinancing was finalized.
Scheduled principal payments of mortgage notes payable subsequent to December
31, 1996, are as follows (in thousands):
1997 $ 124
1998 134
1999 144
2000 156
2001 168
Thereafter 11,557
$12,283
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 income (loss) and Federal
taxable loss (in thousands, except unit data):
1996 1995
Net income (loss) as reported $ 42 $ (216)
Add (deduct):
Depreciation differences (2) (57)
Equity in Joint Venture (26) (38)
Miscellaneous 4 84
Prepaid rents (53) (19)
Federal taxable loss $ (35) $ (246)
Federal taxable loss
per limited partnership unit $ (1.27) $(8.90)
The following is a reconciliation between the Partnership's reported amounts
and Federal tax basis of net assets and liabilities (in thousands):
Net assets as reported $ 4,111
Land and buildings 3,185
Accumulated depreciation 672
Syndication 3,809
Other 873
Net assets - Federal tax basis $12,650
Note E - 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. Property management fees paid to
affiliates of Insignia Financial Group, Inc. during the year ended December 31,
1996 and 1995, are included in operating expenses on the Consolidated Statement
of Operations and are reflected in the following table. The Managing General
Partner and its affiliates received reimbursements and fees as reflected in the
following table:
1996 1995
Property management fees $233 $222
Reimbursement for services of affiliates (1) 153 185
(1) Included in "reimbursements for services of affiliates" for 1996 and 1995,
are approximately $10,000 and $14,000 respectively in reimbursements for
construction oversight costs.
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 - Real Estate and Accumulated Depreciation
(in thousands)
Initial Cost
To Partnership
Cost
Buildings Capitalized
and Related (Written Down)
Personal Subsequent to
Description Encumbrances Land Property Acquisition
Northsprings $ 1,973 $ 736 $ 4,196 $ (308)
Lakeside 4,100 1,259 5,791 (683)
Bexley House 1,375 647 3,067 (113)
Covington Pointe 4,835 1,935 7,041 345
Totals $12,283 $4,577 $20,095 $ (759)
(in thousands)
<TABLE>
<CAPTION>
Gross Amount At Which Carried
At December 31, 1996
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>
Northsprings $ 597 $ 4,027 $ 4,624 $ 1,974 1969 11/85 5-25
Lakeside 1,046 5,321 6,367 2,632 1980 05/86 5-25
Bexley House 542 3,059 3,601 1,383 1972 09/86 5-25
Covington 1,935 7,386 9,321 3,266 1982 03/87 5-25
Totals $4,120 $19,793 $23,913 $ 9,255
</TABLE>
Reconciliation of "Real Estate and Accumulated Depreciation" (in thousands):
Years Ended December 31,
1996 1995
Real Estate
Balance at beginning of year $23,465 $23,230
Property improvements 457 482
Disposal of property (9) (247)
Balance at End of Year $23,913 $23,465
Accumulated Depreciation
Balance at beginning of year $ 8,412 $ 7,788
Additions charged to expense 850 782
Disposal of property (7) (158)
Balance at End of Year $ 9,255 $ 8,412
The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1996 and 1995, is approximately $27,098,000 and approximately
$26,641,000. The accumulated depreciation taken for Federal income tax purposes
at December 31, 1996 and 1995, is approximately $8,583,000 and approximately
$7,731,000.
Note G - Commitments
The Partnership Agreement provides for payment of a fee to the Managing General
Partner for managing the affairs of the Partnership. The fee is 2% of adjusted
cash from operations, as defined in the partnership agreement. The fee is
payable only after the Partnership has distributed to all limited partners,
adjusted cash from operations in any year equal to 10% of their adjusted
invested capital as defined in the partnership agreement. No fees were payable
for the years ended December 31, 1996, or December 31, 1995.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
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 Partners, in their 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 56 President
Robert D. Long, Jr. 29 Controller and Principal
Accounting Officer
William H. Jarrard, Jr. 50 Vice President
John K. Lines 37 Vice President and Secretary
Kelley M. Buechler 39 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.
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.
William H. Jarrard, Jr. has been Managing Director - Partnership Administration
of Insignia since January 1991. Mr. Jarrard served as Managing Director -
Partnership Administration and Asset Management from July 1994 until January
1996.
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 Ocwen 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.
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 1996 or 1995. See "Item
12." below and "Note E" of the Notes to the financial statements in Item 7 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, 1996, the only person or entity known by the Registrant to be
the beneficial owner of more than 5% of the Units of the Registrant is set forth
below:
Amount and Nature of Percent
Entity Title of Class Beneficial Ownership of Class
Hospital Corporation of Units of Limited 3,000 Units @ 11.2%
America Partnership Interest $1,000/Unit
201 West Main Street
Louisville, KY 40202
As of December 31, 1996, 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
Davidson Diversified Properties, Inc., the Managing General Partner of the
Registrant, is owned by MAE GP Corporation, which is wholly owned by
Metropolitan Asset Enhancement. L.P., an affiliate of Insignia.
Effective January 1, 1992, management and administrative services were assumed
by affiliates of Insignia. Management fees paid to affiliates of Insignia in
1996 and 1995 were approximately $233,000 and $222,000, respectively.
Reimbursements for services of affiliates was approximately $153,000 and
$185,000 for the years ended December 31, 1996 and 1995, respectively. These
reimbursements include approximately $10,000 and $14,000 for construction
oversight costs for the years ended December 31, 1996 and 1995, respectively.
The Partnership Agreement provides for the Managing General Partner to receive a
fee for managing the affairs of the Partnership. The fee is 2% of adjusted cash
from operations, as defined in the partnership agreement. The fee is payable
only after the Partnership has distributed to all limited partners, adjusted
cash from operations in any year equal to 10% of their adjusted invested capital
as defined in the partnership agreement. No fees were payable for the years
ended December 31, 1996, or December 31, 1995.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits: See Exhibit Index contained herein.
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
(b) Reports on Form 8-K filed in the fourth quarter of fiscal year 1996:
None.
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 INCOME REAL ESTATE, L.P.
By: Davidson Diversified Properties, Inc.,
as Managing General Partner
By: /s/ Carroll D. Vinson
Carroll D. Vinson
President
Date: March 24, 1997
In accordance with the Exchange Act, this report has been signed below by
the following person on behalf of the Registrant and in the capacities and on
the date indicated.
/s/ Carroll D. Vinson President
Carroll D. Vinson
/s/ Robert D. Long, Jr. Controller
Robert D. Long, Jr. and Principal
Accounting Officer
EXHIBIT INDEX
Exhibit
3 Agreement of Limited Partnership is incorporated by reference to Exhibit
A to the Prospectus of the Registrant dated July 26, 1985 as filed with
the Commission pursuant to Rule 424(b) under the Act.
3A Amendment to Partnership Agreement dated October 1, 1985 is incorporated
by reference to Exhibit 3A to the Registrant's Annual Report on Form 10-
K for the fiscal year ended December 31, 1987.
4 Certificate of Limited Partnership dated April 29, 1985 is incorporated
by reference to Exhibit 4 to the Registrant's Registration Statement on
Form S-11 dated May 7, 1985.
4A Certificate of Amendment to Certificate of Limited Partnership dated
July 16, 1985 is incorporated by reference to Exhibit 4B in Amendment
No. 1 to Registration Statement No. 2-97539, dated July 24, 1985.
10A Agent's Agreement dated July 1, 1985 between the Registrant and Harvey
Freeman & Sons, Inc., is incorporated by reference to Exhibit 10B in
Amendment No. 1 to Registration Statement No. 2-97539, dated July 24,
1985.
10B Agreement Among Agents dated July 1, 1985 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 of Missouri, Inc., 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 in Amendment
No. 1 to Registration Statement No. 2-97539, dated July 24, 1985.
10C Acquisition and Disposition Services Agreement dated July 1, 1985
between the Registrant and Criswell Freeman Company is incorporated by
reference to Exhibit 10D in Amendment No. 1 to Registration Statement
No. 2-97539, dated July 24, 1985.
10D Contract for Sale of Real Estate for North Springs apartments dated
October 16, 1985 between James B. Miller, Karina Miller, Dahlis Winn,
Christine Abrams and William Lichirie, as Tenants in Common and
Tennessee Trust Company is incorporated by reference to Exhibit 10(a) to
the Registrant's Current Report on Form 8-K dated November 13, 1985.
10E Assignment of Contract for Sale of Real Estate for North Springs
Apartments dated November 12, 1985 between Tennessee Trust Company and
the Registrant is incorporated by reference to Exhibit 10(b) to the
Registrant's Current Report on Form 8-K dated November 13, 1985.
10F Promissory Note dated February 14, 1969 executed by Mt. Pleasant Plaza,
Inc., a Georgia corporation payable to The Fulton National Bank of
Atlanta, a corporation having its principal place of business in Fulton
County, Georgia, is incorporated by reference to Exhibit 10G to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1985.
10G Agreement dated December 24, 1969 between Massachusetts Mutual Life
Insurance Company, a Massachusetts corporation and Mt. Pleasant Plaza,
Inc., a corporation of the State of Georgia, is incorporated by
reference to Exhibit 10H to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1985.
10H Purchase Agreement for Lakeside Apartments dated April 4, 1986 between
Lakeside Apartments Venture, a North Carolina general partnership and
Tennessee Trust Company, a Tennessee corporation, is incorporated by
reference to Exhibit 10(a) to the Registrant's Current report on Form 8-
K dated May 20, 1986.
10I Assignment of Agreement dated May 16, 1986 between Tennessee Trust
Company, a Tennessee corporation, and the Registrant is incorporated by
reference to Exhibit 10(b) to the Registrant's Current Report on Form 8-
K dated May 20, 1986.
10J Deed of Trust Note dated June 13, 1989 executed by the Registrant
payable to John Hancock Variable Life Insurance Company relating to
Lakeside Apartments.
10K Deed of Trust and Security Agreement dated April 28, 1980 between
Lakeside Properties, Ltd., a North Carolina limited partnership, Gibson
L. Smith, Jr., Trustee and Continental Illinois National Bank and Trust
Company of Chicago is incorporated by reference to Exhibit 10(d) to the
Registrant's Current Report on Form 80-K dated May 20, 1986.
10L Contract for Sale of Real Estate for The Bexley House dated July 16,
1986 between Bexley House, Limited, an Ohio limited partnership and
Tennessee Trust company is incorporated by reference to Exhibit 10(a) to
the Registrant's Current Report on Form 8-K dated September 30, 1986.
10M Reinstatement and Amendment of Contract for Sale of Real Estate for The
Bexley House dated September 4, 1986 between Bexley House, Limited, an
Ohio limited partnership and Tennessee Trust Company, a Tennessee
corporation, is incorporated by reference to Exhibit 10(b) to the
Registrant's Current Report on Form 8-K dated September 30, 1986.
10N Amendment to Reinstated and Amended Contract for Sale of Real Estate for
The Bexley House dated September 19, 1986 between Bexley House, Limited,
an Ohio limited partnership and Tennessee Trust Company, a Tennessee
corporation, is incorporated by reference to Exhibit 10(c) to the
Registrant's Current Report on Form 80K dated September 30, 1986.
10O Assignment of Contract for Sale of Real Estate dated September 30, 1986
between Tennessee Trust company and the Registrant is incorporated by
reference to Exhibit 10(d) to the Registrant's Current Report on Form 8-
K dated September 30, 1986.
10P Limited Warranty Deed dated September 28, 1986 between Bexley House,
Ltd., an Ohio limited partnership and the Registrant is incorporated by
reference to Exhibit 10(e) to the Registrant's Current Report on Form 8-
K dated September 30, 1986.
10Q Contract for Sale of Real Estate for Covington Pointe Apartments dated
January 20, 1987 between F.G.M.C. Investment Corp., a Texas corporation
Tennessee Trust Company, a Tennessee corporation, is incorporated by
reference to Exhibit 10(a) to the Registrant's Current Report on Form 8-
K dated March 10, 1987.
10R Amendment to Contract for Purchase of Real Estate for Covington Pointe
Apartments dated January 23, 1987 between F.G.M.C. Investment Corp., a
Texas corporation Tennessee Trust Company, a Tennessee corporation, is
incorporated by reference to Exhibit 10(b) to the Registrant's Current
Report on Form 8-K dated March 10, 1987.
10S Assignment of Contract for Purchase of Real Estate for Covington Pointe
Apartments dated March 2, 1987 between Tennessee Trust Company and the
Registrant is incorporated by reference to Exhibit 10(c) to the
Registrant's Current Report on Form 8-K dated March 10,1987.
10T Contract for Purchase of Real Estate for Phase I of Sterling Crest
Apartments dated March 10, 1987 between Sterling Crest Development
Partners, Ltd., a Georgia limited partnership, and Tennessee Trust
Company, a Tennessee corporation, is incorporated by reference to
Exhibit 10(d) to the Registrant's Current Report on Form 8-K dated
March 10, 1987.
10U Mortgage Note dated March 23, 1987 executed by the Registrant payable to
BancOhio National Bank, relating to The Bexley House, is incorporated by
reference to Exhibit a(1) to the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1987.
10V Open-End Mortgage, Assignment of Rents and Security Agreement dated
March 23, 1987 executed by the Registrant in favor of BancOhio National
Bank relating to The Bexley House, is incorporated by reference to
Exhibit a(2) to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1987.
10W Mortgage Note dated March 23, 1987 executed by the Registrant payable to
BancOhio National Bank, relating to The Bexley House, is incorporated by
reference to Exhibit a(3) to the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1987.
10X Open-End Mortgage, Assignment of Rents and Security Agreement dated
March 23, 1987 executed by the Registrant in favor of BancOhio National
Bank relating to The Bexley House, is incorporated by reference to
Exhibit a(4) to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1987.
10Y Sterling Crest Joint Venture Agreement dated June 29, 1987 between the
Registrant and Freeman Georgia Ventures, Inc. is incorporated by
reference to Exhibit 10(b) to the Registrant's Current Report on Form 8-
K dated June 30, 1987.
10Z Assignment of Contract for Purchase of Real Estate for Phase I of
Sterling Crest Apartments dated June 29, 1987 is incorporated by
reference to Exhibit 10(c) to the Registrant's Current Report on Form 8-
K dated June 30, 1987.
10AA Warranty Deed dated June 30, 1987 between Sterling Crest Development
Partners, Ltd. and Sterling Crest Joint Venture, is incorporated by
reference to Exhibit 10(d) to the Registrant's Current Report on Form 8-
K dated June 30, 1987.
10BB Sub-Management Agreement dated June 30, 1987 between Harvey Freeman &
Sons, Inc. and Sterling Property Management Company, is incorporated by
reference to Exhibit 10(k) to the Registrant's Current Report on Form 8-
K dated June 30, 1987.
10CC Property Management Agreement dated June 30, 1987 between Sterling Crest
Joint Venture and Harvey Freemen & Sons, Inc., is incorporated by
reference to Exhibit 10(l) to the Registrant's Current Report on Form 8-
K dated June 30, 1987.
10DD Contract for Purchase of Real Estate for Phase II of Sterling Crest
Apartments dated March 10, 1987 between Sterling Crest Development
Partners, Ltd. and Tennessee Trust Company is incorporated by reference
to Exhibit 10(a) to the Registrant's Report on Form 8 dated December 29,
1987.
10EE Tri-Party Agreement dated May 22, 1987 among North Carolina Federal
Savings & Loan Association, Sterling Crest Development Partners, Ltd.
and Tennessee Trust Company relating to Sterling Crest Apartments, is
incorporated by reference to Exhibit 10(b) to the Registrant's Report on
Form 8 dated December 29, 1987.
10FF Assignment of Contract for Purchase of Real Estate and Tri-Party
Agreement dated November 4, 1987 between Tennessee Trust Company and
Sterling Crest Joint Venture relating to Sterling Crest Apartments, is
incorporated by reference to Exhibit 10(c) to the Registrant's Report on
Form 8 dated December 29, 1987.
10GG Amended and Restated Sterling Crest Joint Venture Joint Venture
Agreement dated June 29, 1987 among the Registrant, Freeman Georgia
Ventures, Inc., and Freeman Growth Plus, L.P., is incorporated by
reference to Exhibit 10(d) to the Registrant's Report on Form 8 dated
December 29, 1987.
10HH 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 10MM to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1988.
10II 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 10NN to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1988.
10JJ Termination Agreement, dated December 31, 1991 among Jacques-Miller,
Inc., Jacques-Miller Property Management, Davidson Diversified
Properties, Inc., and Supar, Inc.
10KK Assignment of Limited Partnership Interest of Freeman Equities, Limited,
dated December 31, 1991 between Davidson Diversified Properties, Inc.
and Insignia Jacques-Miller, L.P.
10LL Assignment of General Partner Interests of Freeman Equities, Limited,
dated December 31, 1991 between Davidson Diversified Properties, Inc.
and MAE GP Corporation.
10MM Stock certificate, dated December 31, 1991 showing ownership of 1,000
shares of Davidson Diversified Properties, Inc. by MAE GP Corporation.
10NN Contracts related to refinancing of debt:
(a) First Deeds of Trust and Security Agreements dated October 28, 1992
between Bexley House, L.P. and First Commonwealth Realty Credit
Corporation, a Virginia Corporation, securing Bexley House Apartments
is incorporated by reference to Exhibit 10NN (a) to the Registrant's
Annual Report on Form 10-KSB for the fiscal year ended December 31,
1992.
(b) Seconds Deeds of Trust and Security Agreements dated October 28, 1992
between Bexley House, L.P. and First Commonwealth Realty Credit
Corporation, a Virginia Corporation, securing Bexley House Apartments
is incorporated by reference to Exhibit 10NN (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
Bexley House, L.P. and First Commonwealth Realty Credit Corporation, a
Virginia Corporation, securing Bexley House Apartments is incorporated
by reference to Exhibit 10NN (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
Bexley House, L.P. and First Commonwealth Realty Credit Corporation, a
Virginia Corporation, securing Bexley House Apartments is
incorporated by reference to Exhibit 10NN (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 Bexley
House, L.P. and First Commonwealth Realty Credit Corporation, relating
to Bexley House Apartments is incorporated by reference to Exhibit
10NN (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 Bexley
House, L.P. and First Commonwealth Realty Credit Corporation, relating
to Bexley House Apartments is incorporated by reference to Exhibit
10NN (f) to the Registrant's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1992.
10OO Contracts related to refinancing of debt:
(a) First Deeds of Trust and Security Agreements dated September 30, 1993
between Davidson IRE Associates, L.P. and Lexington Mortgage Company,
a Virginia Corporation, securing Northsprings Apartments is
incorporated by reference to Exhibit 10oo (a) to the Registrant's
Quarterly Report on Form 10-QSB for the quarter ended September 30,
1993.
(b) Second Deeds of Trust and Security Agreements dated September 30, 1993
between Davidson IRE Associates, L.P. and Lexington Mortgage Company,
a Virginia Corporation, securing Northsprings Apartments is
incorporated by reference to Exhibit 10oo (b) to the Registrant's
Quarterly Report on Form 10-QSB for the quarter ended September 30,
1993.
(c) First Assignments of Leases and Rents dated September 30, 1993 between
Davidson IRE Associates, L.P. and Lexington Mortgage Company, a
Virginia Corporation, securing Northsprings Apartments is incorporated
by reference to Exhibit 10OO (c) to the Registrant's Quarterly Report
on Form 10-QSB for the quarter ended September 30, 1993.
(d) Second Assignments of Leases and Rents dated September 30, 1993
between Davidson IRE Associates, L.P. and Lexington Mortgage Company,
a Virginia Corporation, securing Northsprings Apartments is
incorporated by reference to Exhibit 10OO (d) to the Registrant's
Quarterly Report on Form 10-QSB for the quarter ended September 30,
1993.
(e) First Deeds of Trust Notes dated September 30, 1993 between Davidson
IRE Associates, L.P. and Lexington Mortgage Company, relating to
Northsprings Apartments is incorporated by reference to Exhibit 10OO
(e) to the Registrant's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1993.
(f) Second Deeds of Trust Notes dated September 30, 1993 between Davidson
IRE Associates, L.P. and Lexington Mortgage Company, relating to
Northsprings Apartments is incorporated by reference to Exhibit 10OO
(f) to the Registrant's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1993.
10PP Contracts related to refinancing of debt:
(a) First Deeds of Trust and Security Agreements dated September 30, 1993
between Davidson IRE Associates, L.P. and Lexington Mortgage Company,
a Virginia Corporation, securing Covington Pointe Apartments is
incorporated by reference to Exhibit 10PP (a) to the Registrant's
Quarterly Report on Form 10-QSB for the quarter ended September 30,
1993.
(b) Second Deeds of Trust and Security Agreements dated September 30, 1993
between Davidson IRE Associates, L.P. and Lexington Mortgage Company,
a Virginia Corporation, securing Covington Pointe Apartments is
incorporated by reference to Exhibit 10PP (b) to the Registrant's
Quarterly Report on Form 10-QSB for the quarter ended September 30,
1993.
(c) First Assignments of Leases and Rents dated September 30, 1993 between
Davidson IRE Associates, L.P. and Lexington Mortgage Company, a
Virginia Corporation, securing Covington Pointe Apartments is
incorporated by reference to Exhibit 10PP (c) to the Registrant's
Quarterly Report on Form 10-QSB for the quarter ended September 30,
1993.
(d) Second Assignments of Leases and Rents dated September 30, 1993
between Davidson IRE Associates, L.P. and Lexington Mortgage Company,
a Virginia Corporation, securing Covington Pointe Apartments is
incorporated by reference to Exhibit 10PP (d) to the Registrant's
Quarterly Report on Form 10-QSB for the quarter ended September 30,
1993.
(e) First Deeds of Trust Notes dated September 30, 1993 between Davidson
IRE Associates, L.P. and Lexington Mortgage Company, relating to
Covington Pointe Apartments is incorporated by reference to Exhibit
10PP (e) to the Registrant's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1993.
(f) Second Deeds of Trust Notes dated September 30, 1993 between Davidson
IRE Associates, L.P. and Lexington Mortgage Company, relating to
Covington Pointe Apartments is incorporated by reference to Exhibit
10PP (f) to the Registrant's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1993.
(g) Multifamily Note dated November 1, 1996, between "Davidson Income Real
Estate L.P." and Lehman Brothers Holdings, Inc. d/b/a Lehman Capital,
A Division of Lehman Brothers Holdings, Inc.
10QQ Contracts related to refinancing of debt:
(a) Multifamily Note dated July 1, 1996, between Davidson Income Real
Estate, L.P., a Delaware limited partnership and Lehman Brothers
Holdings, Inc. d/b/a Lehman Capital, a Division of Lehman Brothers
Holdings, Inc.
(b) Rider To Multifamily Note dated July 1, 1996, between Davidson Income
Real Estate, L.P., a Delaware limited partnership and Lehman Brothers
Holdings, Inc. d/b/a Lehman Capital, a Division of Lehman Brothers
Holdings, Inc.
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 Davidson IRE GP Limited Partnership
between Davidson Diversified Properties, Inc. and Davidson Income Real
Estate, L.P. entered into on September 15, 1993 is incorporated by
reference to Exhibit 99A to the Registrant's Quarterly Report on Form 10-
QSB for the quarter ended September 30, 1993.
99B Agreement of Limited Partnership for Davidson IRE Associates, L.P. between
Davidson IRE GP Limited Partnership and Davidson Income Real Estate, L.P
is incorporated by reference to Exhibit 99B to the Registrant's Quarterly
Report on Form 10-QSB for the quarter ended September 30, 1993.
99C Agreement of Limited Partnership for Bexley House L.P. between Davidson
Income GP Limited Partnership and Davidson Income Real Estate, L.P.
entered into on October 13, 1992 is incorporated by reference to Exhibit
99C to the Registrant's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1992.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Davidson
Diversified Real Estate LP 1996 Year-End 10-KSB and is qualified in its entirety
by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000768598
<NAME> DAVIDSON DIVERSIFIED REAL ESTATE LP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 655
<SECURITIES> 0
<RECEIVABLES> 20
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 23,913
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,782
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 12,112
0
0
<COMMON> 0
<OTHER-SE> 4,111
<TOTAL-LIABILITY-AND-EQUITY> 16,782
<SALES> 0
<TOTAL-REVENUES> 4,709
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,745
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,084
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42
<EPS-PRIMARY> 1.54<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
Exhibit 10PP(g)
Loan No. 734079613
Lakeside
MULTIFAMILY NOTE
US $4,100,000
New York, New York
As of November 1, 1996
FOR VALUE RECEIVED, the undersigned promise to pay LEHMAN BROTHERS HOLDINGS
INC. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc., 3 World
Financial Center, New York, New York 10285, or order, the principal sum of FOUR
MILLION ONE HUNDRED THOUSAND AND 00/100 Dollars, with interest on the unpaid
principal balance from the date of this Note, until paid, at the rate of 7.33
percent per annum. Interest only shall be payable at 3 World Financial Center,
New York, New York 10285, or such other place as the holder hereof may designate
in writing, in consecutive monthly installments of Twenty-Five Thousand Forty-
Four and 17/100 Dollars ($25,044.17) on the first day of each month beginning
December 1, 1996, until the entire indebtedness evidenced hereby is fully paid,
except that any remaining indebtedness, if not sooner paid, shall be due and
payable on November 1, 2003.
If any installment under this Note is not paid when due, the entire
principal amount outstanding hereunder and accrued interest thereon shall at
once become due and payable, at the option of the holder hereof. The holder
hereof may exercise this option to accelerate during any default by the
undersigned regardless of any prior forbearance. In the event of any default in
the payment of this Note, and if the same is referred to an attorney at law for
collection or any action at law or in equity is brought with respect hereto, the
undersigned shall pay the holder hereof all expenses and costs, including, but
not limited to, attorney's fees.
Prepayments shall be applied against the outstanding principal balance of
this Note and shall not extend or postpone the due date of wazzu any subsequent
monthly installments or change the amount of such installments, unless the
holder hereof shall agree otherwise in writing. The holder hereof may require
that any partial prepayments be made on the date monthly installments are due
and be in the amount of that part of one or more monthly installments which
would be applicable to principal.
From time to time, without affecting the obligation of the undersigned or
the successors or assigns of the undersigned to pay the outstanding principal
balance of this Note and observe the covenants of the undersigned contained
herein, without affecting the guaranty of any person, corporation, partnership
or other entity for payment of the outstanding principal balance of this Note,
without giving notice to or obtaining the consent of the undersigned, the
successors or assigns of the undersigned or guarantors, and without liability on
the part of the holder hereof, the holder hereof may, at the option of the
holder hereof, extend the time for payment of said outstanding principal balance
or any part thereof, reduce the payments thereon, release anyone liable on any
of said outstanding principal balance, accept a renewal of this Note, modify the
terms and time of payment of said outstanding principal balance, join in any
extension or subordination agreement, release any security given herefor, take
or release other or additional security, and agree in writing with the
undersigned to modify the rate of interest or period of amortization of this
Note or change the amount of the monthly installments payable hereunder.
Presentment, notice of dishonor, and protest are hereby waived by all
makers, sureties, guarantors and endorsers hereof. This Note shall be the joint
and several obligation of all makers, sureties, guarantors and endorsers, and
shall be binding upon them and their successors and assigns.
The indebtedness evidenced by this Note is secured by a Mortgage or Deed of
Trust dated as of the date hereof, and reference is made thereto for rights as
to acceleration of the indebtedness evidenced by this Note. This Note shall be
governed by the law of the jurisdiction in which the Property subject to the
Mortgage or Deed of Trust is located hereunder .
The undersigned shall pay any installment of interest due within ten (10)
calendar days after such installment of interest is due. The undersigned shall
pay any other due hereunder or due in accordance with the terms of the Mortgage
or Deed of Trust securing this Note, within thirty (30) calendar days of the
date such installment is due.
IN WITNESS WHEREOF, Borrower has executed this Note or has caused the same
to be executed by its representatives thereunto duly authorized.
DAVIDSON INCOME REAL ESTATE, L.P., a Delaware
limited partnership d/b/a Freeman Income Real Estate,
L.P.
By: Davidson Diversified Properties, Inc., a Tennessee
corporation, its general partner
By: /s/ William H. Jarrard, Jr.
Name: William H. Jarrard, Jr.
Title: President
LEHMAN BROTHERS HOLDINGS INC. D/B/A
LEHMAN CAPITAL, A DIVISION OF LEHMAN
BROTHERS HOLDINGS INC., a Delaware
corporation
By: /s/ Larry J. Kravetz
Larry J. Kravetz
Authorized Signatory
PAY TO THE ORDER OF FEDERAL HOME LOAN
MORTGAGE CORPORATION WITHOUT RECOURSE.
This 1st day of November, 1996.
LEHMAN BROTHERS HOLDINGS INC. d/b/a
Lehman Capital, A Division of Lehman Brothers
Holdings Inc., a Delaware corporation
By: /s/ Larry J. Kravetz
Name: Larry J. Kravetz
Title: Authorized Signatory
