FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. Securities And Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________to _________
Commission file number 0-15676
DAVIDSON DIVERSIFIED REAL ESTATE III, L.P.
(Exact name of small business issuer as specified in its charter)
Delaware 62-1242599
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
DAVIDSON DIVERSIFIED REAL ESTATE III, L.P.
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 2000
Assets
Cash and cash equivalents $ 667
Receivables and deposits 181
Restricted escrows 89
Other assets 374
Investment properties:
Land $ 2,821
Buildings and related personal property 32,660
35,481
Less accumulated depreciation (18,402) 17,079
$ 18,390
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 178
Tenant security deposit liabilities 120
Accrued property taxes 392
Other liabilities 332
Mortgage notes payable 23,597
Partners' Deficit
General partners $ (125)
Limited partners (1,011.5 units issued and
outstanding) (6,104) (6,229)
$ 18,390
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
b)
DAVIDSON DIVERSIFIED REAL ESTATE III, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
2000 1999
(restated)
Revenues:
Rental income $ 1,376 $ 1,354
Other income 132 110
Total revenues 1,508 1,464
Expenses:
Operating 615 563
General and administrative 39 52
Depreciation 404 372
Interest 536 540
Property taxes 97 111
Total expenses 1,691 1,638
Loss before cumulative effect of a change in
accounting principle (183) (174)
Cumulative effect on prior years of a change in
accounting for the cost of exterior painting and
major landscaping -- 165
Net loss $ (183) $ (9)
Net loss allocated to general partners (2%) (4) --
Net loss allocated to limited partners (98%) (179) (9)
$ (183) $ (9)
Per limited partnership unit:
Loss before cumulative effect of a change in
accounting principle $(176.96) $(169.06)
Cumulative effect of a change in accounting principle -- 160.16
Net loss $(176.96) $ (8.90)
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
c)
DAVIDSON DIVERSIFIED REAL ESTATE III, L.P.
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partners Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 1,013.0 $ 1 $20,240 $20,241
Partners' deficit at
December 31, 1999 1,011.5 $ (121) $(5,925) $(6,046)
Net loss for the three months
ended March 31, 2000 -- (4) (179) (183)
Partners' deficit at
March 31, 2000 1,011.5 $ (125) $(6,104) $(6,229)
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
d)
DAVIDSON DIVERSIFIED REAL ESTATE III, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
(restated)
Cash flows from operating activities:
<S> <C> <C>
Net loss $ (183) $ (9)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 404 372
Amortization of mortgage discounts and loan costs 16 16
Cumulative effect of a change in accounting principle -- (165)
Change in accounts:
Receivables and deposits 79 14
Other assets (58) (63)
Accounts payable 83 29
Tenant security deposit liabilities 4 (6)
Accrued property taxes 108 (12)
Other liabilities (7) 50
Net cash provided by operating activities 446 226
Cash flows from investing activities:
Property improvements and replacements (223) (69)
Net deposits to restricted escrows (1) (2)
Net cash used in investing activities (224) (71)
Cash flows used in financing activities:
Payments on mortgage notes payable (35) (31)
Net increase in cash and cash equivalents 187 124
Cash and cash equivalents at beginning of period 480 168
Cash and cash equivalents at end of period $ 667 $ 292
Supplemental disclosure of cash flow information:
Cash paid for interest $ 520 $ 524
At December 31, 1999, accounts payable and property improvements and
replacements were adjusted by $78,000 for noncash activity.
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
e)
DAVIDSON DIVERSIFIED REAL ESTATE III, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Davidson
Diversified Real Estate III, L.P. (the "Partnership" or "Registrant") have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)
of Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of Davidson Diversified Properties, Inc.
(the "Managing General Partner"), all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31, 2000 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2000. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Partnership's Annual
Report on Form 10-KSB for the year ended December 31, 1999.
Principles of Consolidation
The financial statements include all of the accounts of the Partnership and its
99.9% limited partnership interest in Plainview Apartments, L.P. and its wholly
owned Limited Liability Company Salem GP, LLC. The Managing General Partner of
the consolidated partnership is Davidson Diversified Properties, Inc. Davidson
Diversified Properties, Inc. may be removed as the Managing General Partner of
the consolidated partnership by the Registrant; therefore, the consolidated
partnership is controlled and consolidated by the Registrant. All significant
inter-entity balances have been eliminated.
Change in Accounting Principle
Effective January 1, 1999, the Partnership changed its method of accounting to
capitalize the cost of exterior painting and major landscaping. The Partnership
believes that this accounting principle change is preferable because it provides
a better matching of expenses with the related benefit of the expenditures and
it is consistent with industry practice and the policies of the Managing General
Partner. This accounting change was first reported during the fourth quarter of
1999. Accordingly, net loss for the first quarter of 1999 has been restated to
reflect the accounting change as if it were reported then. This adjustment
decreased income before the cumulative effect of the accounting change for the
first quarter of 1999 by approximately $11,000 ($10.66 per limited partnership
unit). The cumulative effect adjustment of approximately $165,000 is the result
of applying the aforementioned change in accounting principle retroactively and
is included in the loss for 1999. The accounting principle change will not have
an affect on cash flow, funds available for distribution or fees payable to the
Managing General Partner and affiliates.
Note B - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust, with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in
the Managing General Partner. The Managing General Partner does not believe that
this transaction has had or will have a material effect on the affairs and
operations of the Partnership.
Note C - 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 (i) certain
payments to affiliates for services and (ii) reimbursement of certain expenses
incurred by affiliates on behalf of the Partnership. The following payments were
paid or accrued to the Managing General Partner and affiliates during the three
months ended March 31, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in
operating expenses) $ 77 $ 74
Reimbursement for services of affiliates
(included in operating and general and
administrative expenses and investment
properties) 25 33
During the three months ended March 31, 2000 and 1999, affiliates of the
Managing General Partner were entitled to receive 5% of gross receipts from both
of the Registrant's residential properties for providing property management
services. The Registrant paid to such affiliates approximately $77,000 and
$74,000 for the three month periods ended March 31, 2000 and 1999, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $25,000 and
$33,000 for the three months ended March 31, 2000 and 1999, respectively.
AIMCO and its affiliates currently own 297.55 limited partnership units in the
Partnership representing 29.417% of the outstanding units. A number of these
units were acquired pursuant to tender offers made by AIMCO or its affiliates.
It is possible that AIMCO or its affiliates will make one or more additional
offers to acquire additional limited partnership interests in the Partnership
for cash or in exchange for units in the operating partnership of AIMCO. Under
the Partnership Agreement, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the Managing General Partner because of their
affiliation with the Managing General Partner.
Note D - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenue:
The Partnership has one reportable segment: residential properties, which
consists of two apartment complexes, one located in Kentucky and the other in
Indiana. The Partnership rents apartment units to tenants for terms that are
typically twelve months or less.
Measurement of segment profit or loss:
The Partnership evaluates performance based on segment profit (loss) before
depreciation. The accounting policies of the reportable segment are the same as
those described in the Partnership's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1999.
Factors management used to identify the enterprise's reportable segment:
The Partnership's reportable segment consists of investment properties that
offer similar products and services. Although each of the investment properties
is managed separately, they have been aggregated into one segment as they
provide services with similar types of products and customers.
Segment information for the three months ended March 31, 2000 and 1999 is shown
in the tables below (in thousands). The "Other" column includes Partnership
administration related items and income and expense not allocated to the
reportable segment.
2000 Residential Other Totals
Rental income $ 1,376 $ -- $ 1,376
Other income 132 -- 132
Interest expense 536 -- 536
Depreciation 404 -- 404
General and administrative expense -- 39 39
Segment loss (144) (39) (183)
Total assets 18,322 68 18,390
Capital expenditures for investment
properties 145 -- 145
1999 Residential Other Totals
(restated)
Rental income $ 1,354 $ -- $ 1,354
Other income 110 -- 110
Interest expense 540 -- 540
Depreciation 372 -- 372
General and administrative expense -- 52 52
Cumulative effect of a change in
in accounting principle 165 -- 165
Segment profit (loss) 43 (52) (9)
Total assets 18,942 93 19,035
Capital expenditures for investment
properties 69 -- 69
<PAGE>
Note E - Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the Managing General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Note B - Transfer of Control"). The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the Managing General Partner filed a motion seeking dismissal of the
action. In lieu of responding to the motion, the plaintiffs have filed an
amended complaint. The Managing General Partner filed demurrers to the amended
complaint which were heard February 1999. Pending the ruling on such demurrers,
settlement negotiations commenced. On November 2, 1999, the parties executed and
filed a Stipulation of Settlement, settling claims, subject to final court
approval, on behalf of the Partnership and all limited partners who own units as
of November 3, 1999. Preliminary approval of the settlement was obtained on
November 3, 1999 from the Superior Court of the State of California, County of
San Mateo, at which time the Court set a final approval hearing for December 10,
1999. Prior to the December 10, 1999 hearing the Court received various
objections to the settlement, including a challenge to the Court's preliminary
approval based upon the alleged lack of authority of class plaintiffs' counsel
to enter the settlement. On December 14, 1999, the Managing General Partner and
its affiliates terminated the proposed settlement. Certain plaintiffs have filed
a motion to disqualify some of the plaintiffs' counsel in the action. The
Managing General Partner does not anticipate that costs associated with this
case will be material to the Partnership's overall operations.
The Partnership is unaware of any pending or outstanding litigation that is not
of a routine nature arising in the ordinary course of business.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATIONS
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussion of the Registrant's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Registrant's business and results of
operation. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The Partnership's investment properties consist of two apartment complexes. The
following table sets forth the average occupancy of these properties for the
three months ended March 31, 2000 and 1999:
Average Occupancy
2000 1999
Salem Courthouse
Indianapolis, Indiana (1) 92% 96%
Plainview Apartments
Louisville, Kentucky (2) 95% 88%
(1) The decrease in occupancy at Salem Courthouse is attributable to major
road construction which was begun during 2000 and is expected to continue
throughout the year which has had a negative impact on the curb appeal and
traffic flow in the area.
(2) The increase in occupancy at Plainview Apartments is a result of improved
retention of tenants during the latter half of 1999 and into 2000. The
first part of 1999 was adversely affected by employment transfers and new
home purchases. Various concessions are being offered in an effort to
maintain occupancy levels.
Results of Operations
The Registrant's net loss for the three months ended March 31, 2000 was
approximately $183,000 as compared to approximately $9,000 for the corresponding
period in 1999. The increase in net loss is primarily attributable to the
cumulative effect of a change in accounting principle recognized during the
three months ended March 31, 1999 and an increase in total expenses partially
offset by a slight increase in total revenues. The increase in total expenses is
primarily attributable to an increase in operating expense and depreciation
expense. The increase in operating expense is primarily due to an increase in
maintenance expense at both of the Registrant's properties and advertising
expense at Plainview Apartments. Maintenance expense increased as a result of
ground and yard work at Salem Courthouse and plumbing repairs at Plainview
Apartments. In addition Salem Courthouse had received insurance proceeds during
1999 related to some water damage which reduced maintenance expense during 1999.
Depreciation expense increased due to new depreciable assets being placed into
service at both properties. Partially offsetting the increase in total expenses
was a decrease in property taxes. Property taxes decreased as a result of
several years of tax refunds received for Salem Courthouse during 2000.
Total revenues increased due to an increase in rental income and other income.
Rental income increased primarily due to increased rental rates at both of the
Registrant's properties and an increase in occupancy at Plainview Apartments
which more than offset the decrease in occupancy at Salem Courthouse. Other
income increased due to an increase in lease cancellation fees, late charges,
and miscellaneous income at Salem Courthouse Apartments.
Included in general and administrative expenses at both March 31, 2000 and 1999
are reimbursements to the Managing General Partner allowed under the Partnership
Agreement. In addition, costs associated with the quarterly and annual
communications with investors and regulatory agencies and the annual audit
required by the Partnership Agreement are also included.
Effective January 1, 1999, the Partnership changed its method of accounting to
capitalize the cost of exterior painting and major landscaping. The Partnership
believes that this accounting principle change is preferable because it provides
a better matching of expenses with the related benefit of the expenditures and
it is consistent with industry practice and the policies of the Managing General
Partner. This accounting change was first reported during the fourth quarter of
1999. Accordingly, net loss for the first quarter of 1999 has been restated to
reflect the accounting change as if it were reported then. This adjustment
decreased income before the cumulative effect of the accounting change for the
first quarter of 1999 by approximately $11,000 ($10.66 per limited partnership
unit). The cumulative effect adjustment of approximately $165,000 is the result
of applying the aforementioned change in accounting principle retroactively and
is included in the loss for 1999. The accounting principle change will not have
an affect on cash flow, funds available for distribution or fees payable to the
Managing General Partner and affiliates.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the Managing General Partner attempts to protect the Partnership from
the burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At March 31, 2000, the Registrant had cash and cash equivalents of approximately
$667,000 as compared to approximately $292,000 at March 31, 1999. Cash and cash
equivalents increased approximately $187,000 for the three months ended March
31, 2000 from the Registrant's year ended December 31, 1999 and is primarily due
to approximately $446,000 of cash provided by operating activities, which is
partially offset by approximately $224,000 of cash used in investing activities
and approximately $35,000 of cash used in financing activities. Cash used in
investing activities consisted primarily of property improvements and
replacements and net deposits to escrow accounts maintained by the mortgage
lender. Cash used in financing activities consisted of payments of principal
made on the mortgages encumbering the Registrant's properties. The Registrant
invests its working capital reserves in a money market account.
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 Registrant and to comply with Federal,
state, and local legal and regulatory requirements. Capital improvements planned
for both of the Registrant's properties are detailed below.
Plainview Apartments: The Partnership has budgeted approximately $206,000 for
capital improvements during 2000 at Plainview Apartments consisting primarily of
floor covering replacements, roof replacements, air conditioning improvements,
appliances and heating upgrades. The Partnership completed approximately
$120,000 in capital expenditures at Plainview Apartments as of March 31, 2000,
consisting primarily of heating upgrades, building improvements, appliances, and
floor covering replacements. These improvements were funded from operating cash
flow. Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
Salem Courthouse Apartments: The Partnership has budgeted approximately $223,000
for capital improvements during 2000 at Salem Courthouse consisting primarily of
floor covering replacements, fencing, recreation facility enhancements, air
conditioning improvements, and appliances. The Partnership completed
approximately $25,000 in capital expenditures at Salem Courthouse Apartments as
of March 31, 2000, consisting primarily of floor covering and appliance
replacements. These improvements were funded from operating cash flow.
Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Registrant's distributable cash flow, if
any, may be adversely affected at least in the short term.
The Registrant's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Registrant. The mortgage
indebtedness of approximately $23,597,000, net of discount, is amortized over
360 months with a balloon payment of approximately $23,120,000 due at dates
ranging from October 15, 2003 to November 15, 2010. The Managing General Partner
will attempt to refinance such indebtedness and/or sell the properties prior to
such maturity dates. If the properties cannot be refinanced or sold for a
sufficient amount, the Registrant will risk losing such properties through
foreclosure.
The Partnership did not make any distributions to its partners during the three
month periods ended March 31, 2000 or 1999. Future cash distributions will
depend on the levels of net cash generated from operations, the availability of
cash reserves, and the timing of the debt maturities, refinancings and/or
property sales. The Partnership's distribution policy is reviewed on an annual
basis. There can be no assurance, however, that the Registrant will generate
sufficient funds from operations after planned capital expenditures to permit
distributions to its partners during the remainder of 2000 or subsequent
periods. In addition, the Partnership may be restricted from making
distributions if the amount in the reserve account for Salem Courthouse
Apartments maintained by the mortgage lender is less than $400 per apartment
unit or $155,200. As of March 31, 2000, the balance in the reserve account was
approximately $89,000.
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the Managing General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Part I - Financial Information, Item 1. Financial Statements, Note B - Transfer
of Control"). The plaintiffs seek monetary damages and equitable relief,
including judicial dissolution of the Partnership. On June 25, 1998, the
Managing General Partner filed a motion seeking dismissal of the action. In lieu
of responding to the motion, the plaintiffs have filed an amended complaint. The
Managing General Partner filed demurrers to the amended complaint which were
heard February 1999. Pending the ruling on such demurrers, settlement
negotiations commenced. On November 2, 1999, the parties executed and filed a
Stipulation of Settlement, settling claims, subject to final court approval, on
behalf of the Partnership and all limited partners who own units as of November
3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999
from the Superior Court of the State of California, County of San Mateo, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of class plaintiffs' counsel to enter the
settlement. On December 14, 1999, the Managing General Partner and its
affiliates terminated the proposed settlement. Certain plaintiffs have filed a
motion to disqualify some of the plaintiffs' counsel in the action. The Managing
General Partner does not anticipate that costs associated with this case will be
material to the Partnership's overall operations.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K:
None filed during the quarter ended March 31, 2000.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DAVIDSON DIVERSIFIED REAL ESTATE III, L.P.
By: Davidson Diversified Properties, Inc.
Its Managing General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President and
Controller
Date: May 15, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from DAVIDSON
DIVERSIFIED Real Estate III, L.P. 2000 First Quarter 10-QSB and is qualified in
its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000773679
<NAME> DAVIDSON DIVERSIFIED REAL ESTATE III, L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 667
<SECURITIES> 0
<RECEIVABLES> 181
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 35,481
<DEPRECIATION> (18,402)
<TOTAL-ASSETS> 18,390
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 23,597
0
0
<COMMON> 0
<OTHER-SE> (6,229)
<TOTAL-LIABILITY-AND-EQUITY> 18,390
<SALES> 0
<TOTAL-REVENUES> 1,508
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,691
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 536
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (183)
<EPS-BASIC> (176.96)<F2>
<EPS-DILUTED> 0
<FN>
<F1> Registrant has an unclassified balance sheet. <F2> Multiplier is 1.
</FN>
</TABLE>
