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, 1997
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)
(864) 239-1000
Issuer's telephone number
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. $ 4,728,000
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 a specified date within the past 60 days. 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 the aggregate market value of the voting partnership
interests 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 1997 and 1996.
Prior to February 25, 1998 the Managing General Partner was a wholly-owned
subsidiary of MAE GP Corporation ("MAE GP"), which is wholly owned by
Metropolitan Asset Enhancement, L.P., an affiliate of Insignia. Effective
February 25, 1998 MAE GP was merged into Insignia Properties Trust ("IPT"),
which is an affiliate of Insignia. Thus the Managing General Partner is now a
wholly-owned subsidiary of IPT.
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 $ 4,740 $ 2,158 5-25 yrs S/L $ 3,624
Lakeside 6,439 2,852 5-25 yrs S/L 4,689
Bexley House 3,719 1,556 5-25 yrs S/L 2,791
Covington Pointe 9,389 3,583 5-25 yrs S/L 6,692
$24,287 $10,149 $17,796
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 1997 Rate Amortized Date Maturity
Northsprings
1st mortgage $ 1,888 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 1,291 7.60% 21.40 yrs 11/15/02 1,052
2nd mortgage 45 7.60% (1) 11/15/02 45
Covington Pointe
1st mortgage 4,624 7.83% 28.67 yrs 10/15/03 4,169
2nd mortgage 150 7.83% (1) 10/15/03 150
Total 12,159
Less unamortized
discounts (148)
$12,011
(1) Interest only payments.
SCHEDULE OF AVERAGE ANNUAL RENTAL RATE AND OCCUPANCY:
Average Annual Average
Rental Rates Per Unit Occupancy
Property 1997 1996 1997 1996
Northsprings $ 9,489 $9,008 92% 96%
Lakeside 6,376 6,021 93% 95%
Bexley House 11,335 11,076 93% 97%
Covington Pointe 9,361 9,192 92% 92%
The Managing General Partner attributes the decrease in occupancy at
Northsprings and Lakeside to the increased building in their respective markets.
With more apartment complexes in the areas, competition has increased and major
concessions are being offered by competing apartments. The decreased occupancy
at Bexley House is attributable to the lack of a property manager for several
months during 1997. Also contributing to the decline in occupancy at Bexley
House was an increased number of residents moving to assisted living facilities
during the year.
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.
SCHEDULE OF REAL ESTATE TAXES AND RATES:
(dollar amounts in thousands)
1997 1997
Billing Rate
Northsprings $ 71 3.95
Lakeside 81 1.37
Bexley House 84 8.03
Covington Pointe 188 2.56
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 1997, 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, 1997, there are 3,069
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 $377,000 were made in 1997
while distributions of approximately $480,000 were made during 1996. A
distribution of approximately $100,000 was paid to the partners in February
1998. 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
This item should be read in conjunction with the consolidated financial
statements and other items contained elsewhere in this report.
Results of Operations
The Partnership realized a net loss of approximately $77,000 for the year ended
December 31, 1997 compared to net income of approximately $42,000 for the same
period in 1996. The decrease in net income was primarily attributable to the
increase in operating expenses. This increase is a result of an increase in
operating expenses due to an extensive restoration project at Lakeside
Apartments which included major landscaping, interior and exterior painting,
parking lot repairs, gutter repairs and balcony restoration. In addition,
operating expenses increased as a result of marketing campaigns implemented at
Northsprings and Lakeside to increase occupancy in competitive markets.
Offsetting these increases were decreases in general and administrative,
property tax, and interest expenses. General and administrative expenses
decreased due to decreased professional fees and expense reimbursements.
Property tax expense decreased primarily due to a decrease in the assessed value
and tax rate for Covington Pointe and a refund of prior year property taxes for
this location. Interest expense decreased as a result of the refinancing of
Lakeside at a lower rate of interest in November, 1996. Included in operating
expense for the year ended December 31, 1997 is approximately $347,000 of major
repairs and maintenance comprised primarily of parking lot repairs, gutter and
tennis court repairs, major landscaping, exterior painting, and exterior
building repairs predominately at Lakeside Apartments.
The Partnership owns 17.5% of Sterling Crest Joint Venture. Equity in the
income of the joint venture decreased as a result of a decrease in the net
income of Sterling Crest Joint Venture's investment property, Brighton Crest.
The decrease in net income was due to an increase in operating expenses.
Operating expenses increased as a result of marketing campaigns to increase
occupancy at Brighton Crest. In addition, operating expenses increased due to
major repairs and maintenance at Brighton Crest involving parking lot and roof
repairs, and exterior painting.
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, 1997, the Partnership had cash and cash equivalents of
approximately $776,000 compared to approximately $655,000 at December 31, 1996.
The net increase in cash and cash equivalents is approximately $121,000 for the
year ended December 31, 1997. Cash and cash equivalents had a net decrease of
approximately $219,000 for the year ended December 31, 1996. Net cash provided
by operating activities increased as a result of a decrease in net cash used for
satisfaction of accounts payable and other liabilities due to the timing of
payments to vendors. Offsetting the increase in cash provided by operating
activities was an increase in receivables and deposits at December 31, 1997.
Net cash used for investing activities decreased as a result of a decrease in
capital property improvements and replacements and in deposits to restricted
escrows at the investment properties. Net cash used in financing activities
increased primarily as a result of the absence of proceeds from any mortgage
refinancing in 1997. This increase was partially offset by a decrease in
distributions paid to partners during 1997.
The Partnership has budgeted approximately $442,000 for major capital
expenditures and maintenance expenses for 1998. These capital expenditures and
maintenance expenses will be incurred only if cash is available from operations
or is received from the capital reserve accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership. Such assets are currently
thought to be sufficient for any near-term needs of the Partnership. The
mortgage indebtedness of approximately $12,011,000, 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 limited partners during the years
ended December 31, 1997 and 1996, were approximately $363,000 and $466,000,
respectively. Additionally, distributions to general partners for each of the
same time periods totaled approximately $14,000. 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. A
distribution of approximately $100,000 was paid to the partners in February of
1998.
Year 2000
The Partnership is dependent upon the Managing General Partner and Insignia for
management and administrative services. Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue"). The project is estimated to be completed
not later than December 31, 1998, which is prior to any anticipated impact on
its operating systems. The Managing General Partner believes that with
modifications to existing software and conversions to new software, the Year
2000 Issue will not pose significant operational problems for its computer
systems. However, if such modifications and conversions are not made, or are not
completed timely, the Year 2000 Issue could have a material impact on the
operations of the Partnership.
Other
Certain items discussed in this annual report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements speak only as of the date
of this annual report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates of revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
ITEM 7. FINANCIAL STATEMENTS
DAVIDSON INCOME REAL ESTATE LIMITED PARTNERSHIP
LIST OF CONSOLIDATED FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors
Consolidated Balance Sheet - December 31, 1997
Consolidated Statements of Operations - Years ended December 31, 1997
and 1996
Consolidated Statements of Changes in Partners' Capital (Deficit) - Years
ended December 31, 1997 and 1996
Consolidated Statements of Cash Flows - Years ended December 31, 1997
and 1996
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, 1997, 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, 1997. 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) at December 31, 1997,
and the consolidated results of its operations and its cash flows for each of
the two years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
/s/ERNST & YOUNG LLP
Greenville, South Carolina
February 25, 1998
DAVIDSON INCOME REAL ESTATE LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
(in thousands, except unit data)
December 31, 1997
Assets
Cash and cash equivalents $ 776
Receivables and deposits 443
Restricted escrows 315
Other assets 333
Investment properties (Notes C and F)
Land $ 4,120
Buildings and related personal property 20,167
24,287
Less accumulated depreciation (10,149) 14,138
Investment in Joint Venture 264
$16,269
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 121
Tenant security deposit liabilities 93
Accrued property taxes 272
Other liabilities 115
Mortgage notes payable (Notes C and F) 12,011
Partners' Capital (Deficit)
General partners' $ (661)
Limited partners' (26,776 units
issued and outstanding) 4,318 3,657
$16,269
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,
1997 1996
Revenues:
Rental income $ 4,511 $ 4,459
Other income 217 250
Total revenues 4,728 4,709
Expenses:
Operating 2,351 2,105
General and administrative 179 234
Depreciation 894 850
Interest 1,016 1,084
Property taxes 409 472
Total expenses 4,849 4,745
(Loss) before equity in income of joint venture (121) (36)
Equity in income of joint venture 44 78
Net (loss) income $ (77) $ 42
Net (loss) income allocated to general partners (3%) $ (2) $ 1
Net (loss) income allocated to limited partners (97%) (75) 41
$ (77) $ 42
Net (loss) income per limited partnership unit $ (2.80) $ 1.54
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, 1995 26,776 $(632) $ 5,181 $ 4,549
Distributions -- (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
Distributions -- (14) (363) (377)
Net loss for the year
ended December 31, 1997 -- (2) (75) (77)
Partners' capital (deficit)
at December 31, 1997 26,776 $(661) $ 4,318 $ 3,657
See Accompanying Notes to Consolidated Financial Statements
DAVIDSON INCOME REAL ESTATE LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
1997 1996
Cash flows from operating activities:
Net (loss) income $ (77) $ 42
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation 894 850
Amortization of discounts and loan costs 83 74
Equity in income of joint venture (44) (78)
Change in accounts:
Receivables and deposits (50) 3
Other assets (16) (3)
Accounts payable 58 (32)
Tenant security deposit liabilities (8) (1)
Accrued property taxes (25) 3
Other liabilities 17 (42)
Net cash provided by operating activities 832 816
Cash flows from investing activities:
Property improvements and replacements (374) (565)
Withdrawals from (deposits to) restricted escrows 95 (151)
Distributions from joint venture 71 112
Net cash used in investing activities (208) (604)
Cash flows from financing activities:
Payments on mortgage notes payable (124) (130)
Distributions to partners (377) (480)
Proceeds from long-term borrowings -- 4,100
Repayment of mortgage notes payable -- (3,812)
Loan costs (2) (109)
Net cash used in financing activities (503) (431)
Net increase (decrease) in cash and cash equivalents 121 (219)
Cash and cash equivalents at beginning of year 655 874
Cash and cash equivalents at end of year $ 776 $ 655
Supplemental disclosure of cash flow information:
Cash paid for interest $ 934 $ 986
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY
Property improvements and replacements
Property improvements and replacements were adjusted approximately $108,000 at
December 31, 1996, for non-cash amounts in accounts payable at December 31,
1995.
See Accompanying Notes to Consolidated Financial Statements
DAVIDSON INCOME REAL ESTATE LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
December 31, 1997
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.
Prior to February 25, 1998 the Managing General Partner was a wholly-owned
subsidiary of MAE GP Corporation ("MAE GP"). Effective February 25, 1998 MAE GP
was merged into Insignia Properties Trust ("IPT"), which is an affiliate of
Insignia Financial Group, Inc. ("Insignia"). Thus the Managing General Partner
is now a wholly-owned subsidiary of IPT.
Principles of Consolidation: The consolidated 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. The Partnership may remove
the General Partner of both Bexley House, L.P., and Davidson IRE Associates,
L.P.; therefore, the consolidated partnerships are controlled and consolidated
by the Partnership. All significant interpartnership balances have been
eliminated.
Use of Estimates: The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
consolidated 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, 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
partnership agreement. Thereafter, upon payment to an affiliate of the general
partners certain real estate commissions and incentive fees as described in the
partnership agreement, remaining cash from sales or refinancings are allocated
97% to 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.
Distributions of cash from operations per limited partnership unit were $13.56
and $17.40 for 1997 and 1996, respectively. The number of limited partnership
units outstanding for 1997 and 1996 was 26,776 units.
Restricted Escrows:
Capital Improvement Reserve - 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 reserve" for certain
capital improvements. At December 31, 1997, approximately $113,000 remained in
escrow for 1998 capital improvements of which any excess funds will be returned
for property operations.
Reserve Account - In addition to the Capital Improvement Reserve for
Lakeside Apartments, 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, 1997, the account
balances were approximately $55,000, $79,000 and $68,000, 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. The funds which total
approximately $336,000 are included in receivables and deposits.
Investment Properties: Investment properties are stated at cost. Acquisition
fees are capitalized as a cost of real estate. The Partnership records
impairment losses on long-lived assets used in operations when events and
circumstances indicate that the assets might be impaired and the undiscounted
cash flows estimated to be generated by those assets are less than the carrying
amounts of those assets.
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: Includes cash on hand and in banks, certificates of
deposit and money market funds with original maturities less than 90 days. At
certain times, the amount of cash deposited at a bank may exceed the limit on
insured deposits.
Tenant Security Deposits: The Partnership requires security deposits from
lessees for the duration of the lease and such deposits are included in
receivables and deposits. The security deposits are refunded when the tenant
vacates, provided the tenant has not damaged the space and is current on its
rental payments.
Loan Costs: Loan costs of approximately $499,000, less accumulated amortization
of approximately $191,000 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.
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. 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 $122,000
and $103,000 for the years ended December 31, 1997 and 1996, respectively.
Fair Value of Financial Instruments: The Partnership believes that the carrying
amount of its financial instruments (except for long term debt) approximates
their fair value due to the short term maturity of these instruments. The fair
value of the Partnership's long term debt, after discounting the scheduled loan
payments at an estimated borrowing rate currently available to the Partnership,
approximates its carrying value.
Income Taxes: No provision has been made in the consolidated financial
statements for Federal income taxes because, under current law, no Federal
income taxes are paid directly by the Partnership. The unit holders are
responsible for their respective shares of Partnership net income or loss. The
Partnership reports certain transactions differently for tax than for financial
statement purposes.
Reclassifications: Certain reclassifications have been made to the 1996
balances to conform to the 1997 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 31,1997
Total assets $ 8,867
Total liabilities (6,432)
Total ventures' equity $ 2,435
Year Ended
December 31, 1997
Total revenues $ 2,555
Total expenses (2,304)
$ 251
In 1997 and 1996, the Partnership received distributions of approximately $
71,000 and $112,000 respectively from the Joint Venture. In 1997 and 1996, the
Partnership recognized equity in the income of the Joint Venture of
approximately $44,000 and $78,000, respectively.
NOTE C - MORTGAGE NOTES PAYABLE
The principle 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 1997 Interest Rate Date Maturity
Northsprings
1st mortgage $ 1,888 $ 14 7.83% 10/15/03 $1,701
2nd mortgage 61 (a) 7.83% 10/15/03 61
Lakeside 4,100 25 7.33% 11/01/03 4,100
Bexley House
1st mortgage 1,291 12 7.60% 11/15/02 1,052
2nd mortgage 45 (a) 7.60% 11/15/02 45
Covington Pointe
1st mortgage 4,624 35 7.83% 10/15/03 4,169
2nd mortgage 150 1 7.83% 10/15/03 150
Total 12,159
Less unamortized
discounts (148)
$12,011
(a) Monthly payment is less than $1,000
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 $4,100,000 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.
This mortgage indebtedness, secured by Lakeside Apartments, 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
$4,100,000 with Lehman Brothers Holding, Inc. The initial agreement required
that the loan mature September 1, 1996, with a possible extension to October 1,
1996. A subsequent amendment extended the maturity date to November 15, 1996.
Scheduled principal payments of mortgage notes payable subsequent to December
31, 1997, are as follows (in thousands):
1998 $ 134
1999 144
2000 156
2001 168
2002 1,275
Thereafter 10,282
$12,159
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 consolidated 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) income and Federal
taxable loss (in thousands, except unit data):
1997 1996
Net (loss) income as reported $ (77) $ 42
Add (deduct):
Depreciation differences (198) (2)
Equity in Joint Venture (7) (26)
Miscellaneous 15 4
Prepaid rents 49 (53)
Federal taxable loss $ (218) $ (35)
Federal taxable loss
per limited partnership unit $ (7.90) $ (1.27)
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities (in thousands) as of December
31, 1997:
Net assets as reported $ 3,657
Land and buildings 3,185
Accumulated depreciation 474
Syndication 3,809
Other 929
Net assets - Federal tax basis $12,054
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. The following amounts were paid to the
Managing General Partner and its affiliates in 1997 and 1996 (in thousands):
Years Ended December 31,
1997 1996
Property management fees (included in operating expenses) $233 $233
Reimbursement for services of affiliates (included in
general and administrative and operating expenses) (1) 124 153
(1) Included in "Reimbursements for services of affiliates" for the years ended
December 31, 1997 and 1996, are approximately $19,000 and $10,000, respectively,
in reimbursements for construction oversight costs.
For the period of January 1, 1996 to August 31, 1997, the Partnership insured
its properties under a master policy through an agency and insurer unaffiliated
with the General Partner. An affiliate of the 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 master policy. The
current agent assumed the financial obligations to the affiliate of the General
Partner, who receives payment on these obligations from the agent. The amount
of the Partnership's insurance premiums accruing to the benefit of the affiliate
of the General Partner by virtue of the agent's obligations is not significant.
On September 26, 1997, an affiliate of the Managing General Partner purchased
Lehman Brothers' Class "D" subordinated bonds of SASCO, 1992-M1. These bonds
are secured by 55 multi-family apartment mortgage loan pairs held in Trust,
including Bexley House Apartments owned by the Partnership.
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 $ 1,949 $ 736 $ 4,196 $ (192)
Lakeside 4,100 1,259 5,791 (611)
Bexley House 1,336 647 3,067 5
Covington Pointe 4,774 1,935 7,041 413
Totals $12,159 $4,577 $20,095 $ (385)
<TABLE>
<CAPTION>
Gross Amount At Which Carried
At December 31, 1997
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 $ 4,143 $ 4,740 $ 2,158 1969 11/85 5-25
Lakeside 1,046 5,393 6,439 2,852 1980 05/86 5-25
Bexley House 542 3,177 3,719 1,556 1972 09/86 5-25
Covington Pointe 1,935 7,454 9,389 3,583 1982 03/87 5-25
Totals $4,120 $20,167 $24,287 $ 10,149
</TABLE>
Reconciliation of "Real Estate and Accumulated Depreciation" (in thousands):
Years Ended December 31,
1997 1996
Real Estate
Balance at beginning of year $23,913 $23,465
Property improvements 374 457
Disposals of property -- (9)
Balance at end of year $24,287 $23,913
Accumulated Depreciation
Balance at beginning of year $ 9,255 $ 8,412
Additions charged to expense 894 850
Disposals of property -- (7)
Balance at end of year $10,149 $ 9,255
The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1997 and 1996, is approximately $27,471,000 and $27,098,000,
respectively. Accumulated depreciation for Federal income tax purposes at
December 31, 1997 and 1996, is approximately $9,675,000 and $8,583,000,
respectively.
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, 1997 or December 31, 1996.
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.
Prior to February 25, 1998 the Managing General Partner was a wholly-owned
subsidiary of MAE GP Corporation ("MAE GP") which is wholly owned by
Metropolitan Asset Enhancement, L.P., an affiliate of Insignia. Effective
February 25, 1998 MAE GP was merged into Insignia Properties Trust ("IPT"),
which is an affiliate of Insignia. Thus the Managing General Partner is now a
wholly-owned subsidiary of IPT.
The present officers of the Managing General Partner are listed below:
Name Age Position
Carroll D. Vinson 57 President and Director
Robert D. Long, Jr. 30 Vice President and Chief
Accounting Officer
William H. Jarrard, Jr. 51 Vice President
Daniel M. LeBey 32 Secretary
Kelley M. Buechler 40 Assistant Secretary
Carroll D. Vinson has been President and Director of the Managing General
Partner since August of 1994. He has acted as Chief Operating Officer of IPT
since May 1997. During 1993 to August 1994, Mr. Vinson was affiliated with
Crisp, Hughes & Co. (regional CPA firm) and engaged in various other investment
and consulting activities which included portfolio acquisitions, asset
dispositions, debt restructurings and financial reporting. 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. has been Vice President and Chief Accounting Officer of the
Managing General Partner since 1993. Mr. Long joined Metropolitan Asset
Enhancement, L.P. ("MAE"), an affiliate of Insignia, in September 1993. Since
1994 he has acted as Vice President and Chief Accounting Officer of the MAE
subsidiaries. Mr. Long was an accountant for Insignia until joining MAE in 1993.
Prior to joining Insignia, Mr. Long was an auditor for the State of Tennessee
and was associated with the accounting firm of Harsman Lewis and Associates.
William H. Jarrard, Jr. has been Vice President of the Managing General Partner
since January 1992. He has acted as Senior Vice President of IPT since May
1997. Mr. Jarrard previously acted as Managing Director - Partnership
Administration of Insignia From January 1991 through September 1997 and served
as Managing Director - Partnership Administration and Asset Management of
Insignia from July 1994 until January 1996.
Daniel M. LeBey has been Secretary of the Managing General Partner since January
29, 1998 and Insignia's Assistant Secretary since April 30, 1997. Since July
1996 he has also served as Insignia's Associate General Counsel. From September
1992 until June 1996, Mr. LeBey was an attorney with the law firm of Alston &
Bird LLP, Atlanta, Georgia.
Kelley M. Buechler has been Assistant Secretary of the Managing General Partner
since 1993 and Assistant Secretary of Insignia since 1991.
ITEM 10. EXECUTIVE COMPENSATION
The Registrant was not required to and did not pay remuneration to officers or
directors of the Managing General Partner during 1997 or 1996. However,
reimbursements and other payments have been made to the Partnership's Managing
General Partner and its affiliates, as described in "Item 12" below.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1997, the only person or entity known by the Registrant to be
the beneficial owner of more than 5 percent 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
201 West Main Street
Louisville, KY 40202
As of December 31, 1997, 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
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 amounts were paid to the
Managing General Partner and its affiliates in 1997 and 1996 (in thousands):
Years Ended
December 31,
1997 1996
Property management fees $233 $233
Reimbursement for services of affiliates (1) 124 153
(1) Included in "Reimbursements for services of affiliates" for the years ended
December 31, 1997 and 1996, are approximately $19,000 and $10,000, respectively,
in reimbursements for construction oversight costs.
For the period of January 1, 1996 to August 31, 1997, the Partnership insured
its properties under a master policy through an agency and insurer unaffiliated
with the 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 master
policy. The current agent assumed the financial obligations to the affiliate of
the Managing General Partner, who receives payment 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.
On September 26, 1997, an affiliate of the Managing General Partner purchased
Lehman Brothers' Class "D" subordinated bonds of SASCO, 1992-M1. These bonds
are secured by 55 multi-family apartment mortgage loan pairs held in Trust,
including Bexley House Apartments owned by the Partnership.
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, 1997 or December 31, 1996.
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 1997.
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 and Director
Date: March 13, 1998
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 and Director
Carroll D. Vinson
/s/ Robert D. Long, Jr. Vice President and Chief
Robert D. Long, Jr. 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
Income Real Estate, L.P. 1997 Year-End 10-KSB and is qualified in its entirety
by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000768598
<NAME> DAVIDSON INCOME REAL ESTATE, L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 776
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 24,287
<DEPRECIATION> (10,149)
<TOTAL-ASSETS> 16,269
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 12,011
0
0
<COMMON> 0
<OTHER-SE> 3,657
<TOTAL-LIABILITY-AND-EQUITY> 16,269
<SALES> 0
<TOTAL-REVENUES> 4,728
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,849
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,016
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (77)
<EPS-PRIMARY> 2.80<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
