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
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT of 1934
For the transition period.........to.........
Commission file number 0-15675
DAVIDSON GROWTH PLUS, L.P.
(Exact name of small business issuer as specified in its charter)
Delaware 52-1462866
(State or other jurisdiction of (IRS 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)
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 GROWTH PLUS, L.P.
CONSOLIDATED BALANCE SHEET
(in thousands, except unit data)
(Unaudited)
September 30, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 866
Restricted-tenant security deposits 115
Accounts receivable 4
Escrows for taxes and insurance 424
Restricted escrows 464
Other assets 361
Investment properties:
Land $ 4,650
Buildings and related personal property 19,057
23,707
Less accumulated depreciation (8,962) 14,745
$16,979
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 23
Tenant security deposits 115
Accrued taxes 341
Other liabilities 191
Subordinated management fee 82
Mortgage notes payable 12,032
Minority Interest 269
Partners' (Deficit) Capital
General partners $ (701)
Limited partners (28,371.75 units
issued and outstanding) 4,627 3,926
$16,979
See Accompanying Notes to Consolidated Financial Statements
b) DAVIDSON GROWTH PLUS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 1,260 $ 1,253 $ 3,714 $ 3,705
Other income 62 89 174 214
Total revenues 1,322 1,342 3,888 3,919
Expenses:
Operating 451 397 1,210 1,192
General and administrative 46 46 142 161
Maintenance 176 247 549 570
Depreciation 199 191 585 564
Interest 267 269 800 809
Property taxes 115 118 343 336
Subordinated partnership management fee 4 4 15 14
Total expenses 1,258 1,272 3,644 3,646
Loss on disposal of property -- -- -- (8)
Minority interest in net
income of joint venture (13) (25) (41) (59)
Net income $ 51 $ 45 $ 203 $ 206
Net income allocated to
general partners (3%) $ 2 $ 1 $ 6 $ 6
Net income allocated to
limited partners (97%) 49 44 197 200
Net income $ 51 $ 45 $ 203 $ 206
Net income per limited
partnership unit $ 1.73 $ 1.55 $ 6.94 $ 7.05
<FN>
See Accompanying Notes to Consolidated Financial Statements
</FN>
</TABLE>
c) DAVIDSON GROWTH PLUS, L.P.
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(in thousands, except unit data)
(Unaudited)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partners Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 28,371.75 $ 1 $ 28,376 $ 28,377
Partners' (deficit) capital at
December 31, 1996 28,371.75 $ (686) $ 5,127 $ 4,441
Distributions to partners -- (21) (697) (718)
Net income for the nine months
ended September 30, 1997 -- 6 197 203
Partners' (deficit) capital at
September 30, 1997 28,371.75 $ (701) $ 4,627 $ 3,926
<FN>
See Accompanying Notes to Consolidated Financial Statements
</FN>
</TABLE>
d) DAVIDSON GROWTH PLUS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 203 $ 206
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 585 564
Amortization of discounts and loan costs 79 74
Minority interest in net income of joint venture 41 59
Loss on disposal of property -- 8
Change in accounts:
Restricted cash (7) (2)
Accounts receivable (2) 4
Escrows for taxes and insurance (180) 60
Other assets (35) (48)
Accounts payable (10) (17)
Tenant security deposit liabilities 7 5
Accrued taxes 178 29
Other liabilities (11) (28)
Subordinated management fee 15 14
Net cash provided by operating activities 863 928
Cash flows from investing activities:
Property improvements and replacements (138) (185)
Deposits to restricted escrows (14) (8)
Receipts from restricted escrows -- 22
Net cash used in investing activities (152) (171)
Cash flows from financing activities:
Payments on mortgage notes payable (164) (151)
Distributions to partners (718) (760)
Distributions to minority interest partner (71) (112)
Net cash used in financing activities (953) (1,023)
Net decrease in unrestricted cash and cash
equivalents (242) (266)
Unrestricted cash and cash equivalents at beginning
of period 1,108 1,161
Unrestricted cash and cash equivalents at end
of period $ 866 $ 895
Supplemental disclosure of cash flow information:
Cash paid for interest $ 722 $ 734
<FN>
See Accompanying Notes to Consolidated Financial Statements
</FN>
</TABLE>
e) DAVIDSON GROWTH PLUS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Davidson Growth
Plus, L.P. (the "Partnership" or the "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 Growth Plus GP Corporation
(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 and nine month periods ended
September 30, 1997, are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 1997. 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 fiscal year ended
December 31, 1996.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 presentation.
NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES
Affiliates of Insignia Financial Group, Inc. ("Insignia") own the controlling
ownership interest in the Partnership's Managing General Partner with certain
affiliates of Insignia providing property management and asset management
services to the Partnership.
The following payments were made to Insignia and its affiliates during the nine
months ended September 30, 1997 and 1996:
1997 1996
(in thousands)
Property management fees $ 192 $ 192
Reimbursement for services of affiliates 122 119
(includes approximately $17,000 and
$11,000 in construction oversight
costs for the periods ended
September 30, 1997, and 1996, respectively)
For the period from January 1, 1996, to August 31, 1997, the Partnership insured
its properties under a master policy through an agency and insurer unaffiliated
with the Managing General Partner. An affiliate of the Managing General Partner
acquired, in the acquisition of a business, certain financial obligations from
an insurance agency which was later acquired by the agent who placed the master
policy. The 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 that accrued to the
benefit of the affiliate of the Managing General Partner by virtue of the
agent's obligations was not significant.
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, and is payable only
after the Partnership has distributed, to the limited partners, adjusted cash
from operations in any year equal to 10% of the limited partners adjusted
invested capital as defined in the Partnership Agreement. Unpaid subordinated
partnership management fees at September 30, 1997, were $82,000, of which
$15,000 related to the nine months ending September 30, 1997.
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 suecured by 55 multi-family apartment mortgage loan pairs held in Trust,
including The Fairway Apartments owned by the Partnership.
On August 29, 1996, the Limited Partnership Agreement was amended to remove
Davidson Diversified Properties, Inc. ("DDPI") as Managing General Partner and
admit Davidson Growth Plus GP Corporation ("DGPGP"), an affiliate, as Managing
General Partner in the place and stead of DDPI effective as of that date.
NOTE C - INVESTMENT IN JOINT VENTURE
The Partnership has a 82.5% investment in the Sterling Crest JV (the "Joint
Venture"), which owns Brighton Crest Apartments. This investment is accounted
for by the Partnership using the equity method of accounting. The minority
interest partner's share of the Joint Venture is shown as "Minority Interest" on
the Partnership's balance sheet.
NOTE D - DISTRIBUTIONS TO PARTNERS
During the nine months ended September 30, 1997, the Partnership paid cash
distributions from operations of approximately $718,000. During the nine months
ended September 30, 1996, the Partnership distributed approximately $760,000
from operations to the partners. In addition, cash distributions of $71,000 and
$112,000 were paid to the minority interest partner during the nine months ended
September 30, 1997 and 1996, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of three apartment complexes.
The following table sets forth the average occupancy of the properties for the
nine months ended September 30, 1997 and 1996:
Average
Occupancy
1997 1996
Brighton Crest Apartments
Marietta, Georgia 92% 96%
The Fairway Apartments
Plano, Texas 92% 97%
The Village Apartments
Brandon, Florida 99% 98%
The decrease in occupancy at Brighton Crest Apartments is attributable to the
new home purchases in this area. The decrease in occupancy at The Fairway
Apartments is due to increased rental rates and a demand for units with more
bedrooms than are currently available at this complex.
The Partnership realized net income of approximately $203,000 for the nine
months ended September 30, 1997, compared to net income of approximately
$206,000 for the nine months ended September 30, 1996. The Partnership realized
net income of approximately $51,000 for the three months ended September 30,
1997, compared to net income of approximately $45,000 for the three months ended
September 30, 1996.
Net income for the three and nine months ended September 30, 1997, remained
relatively constant as compared to the three and nine months ended September 30,
1996. However, there were fluctuations in several income and expense categories
that warrant further explanation. Other income decreased for the three and nine
months ended September 30, 1997, versus the same periods in 1996, due to a
decrease in utility collections at Brighton Crest Apartments resulting from
decreased utility expense incurred by the property as a result of fewer new
tenant leases. During the nine months ended September 30, 1997, there was an
increase in operating expenses. This increase is due to increases in referral
fees and rental concessions at Brighton Crest Apartments. These expenses were
incurred in an effort to attract new tenants to the property. Partially
offsetting these increases in expenses were decreases in general and
administrative and maintenance expenses. General and administrative expenses
decreased due to a reduction in legal fees paid by the Partnership. Maintenance
expenses decreased due to the completion of major repairs in 1996 at Brighton
Crest Apartments and The Village Apartments. Additionally, there was a decrease
in the minority interest in net income of joint venture which resulted from a
decrease in the net income of the joint venture. Net income from Brighton Crest
Apartments decreased primarily from a decrease in rental income and an increase
in operating expenses. Rental income decreased as a result of decreased
occupancy at the property (See discussion above). As mentioned previously, in
an effort to combat the decrease in occupancy, the property offered increased
referral fees and rental concessions, thereby increasing operating expense. The
loss on disposal of property of $8,000 during the nine months ended September
30, 1996, resulted from the write-off of roofs at The Fairway Apartments. These
roofs had not been fully depreciated at the time of the replacement.
Included in maintenance expense for the nine months ended September 30, 1997, is
approximately $176,000 of major repairs and maintenance comprised primarily of
expenses relating to the gutter and roof repair project. Included in
maintenance expense for the nine months ended September 30, 1996, is
approximately $227,000 of major repairs and maintenance comprised primarily of
exterior building repairs and major landscaping.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of each of its investment
properties to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting the Partnership from increases in
expense. As part of this plan, the Managing General Partner attempts to protect
the Partnership from the burden of inflation-related increases in expenses by
increasing rents and maintaining a high overall occupancy level. However, due to
changing market conditions, which can result in the use of rental concessions
and rental reductions to offset softening market conditions, there is no
guarantee that the Managing General Partner will be able to sustain such a plan.
The Partnership held unrestricted cash and cash equivalents of approximately
$866,000 at September 30, 1997, compared to unrestricted cash and cash
equivalents of approximately $895,000 at September 30, 1996. Net cash provided
by operating activities decreased due to an increase in the escrows for taxes
and insurance, partially offset by an increase in accrued taxes. Net cash used
in investing activities decreased due to a decrease in capitalized property
improvements and replacements. Net cash used in financing activities decreased
due to decreased distributions to partners and to the minority interest partner.
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 $12,032,000, net of discount, is
amortized over periods ranging from approximately twenty-one to approximately
twenty-nine years with balloon payments totaling $10,750,000 due in 2002 and
2003, at which time the individual properties will either be refinanced or sold.
Future cash distributions will depend on the levels of net cash generated from
operations, property sales and the availability of cash reserves. Cash
distributions of $718,000 and $760,000 were made to the partners during the nine
months ended September 30, 1997 and 1996, respectively. Cash distributions of
$71,000 and $112,000 were paid to the minority interest partner during the nine
months ended September 30, 1997 and 1996, respectively.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits: None.
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 September 30, 1997.
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 GROWTH PLUS L.P.
BY: Davidson Growth Plus GP Corporation
Managing General Partner
By: /s/ William H. Jarrard, Jr.
William H. Jarrard, Jr.
President
By: /s/ Ronald Uretta
Ronald Uretta
Vice President and Treasurer
Date: November 4, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Davidson
Growth Plus, L.P. 1997 Third Quarter 10-QSB and is qualified in its entirety by
reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000795757
<NAME> DAVIDSON GROWTH PLUS, L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 866
<SECURITIES> 0
<RECEIVABLES> 4
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 23,707
<DEPRECIATION> 8,962
<TOTAL-ASSETS> 16,979
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 12,032
0
0
<COMMON> 0
<OTHER-SE> 3,926
<TOTAL-LIABILITY-AND-EQUITY> 16,979
<SALES> 0
<TOTAL-REVENUES> 3,888
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,644
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 800
<INCOME-PRETAX> 203
<INCOME-TAX> 0
<INCOME-CONTINUING> 203
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 203
<EPS-PRIMARY> 6.94<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
