FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
For Quarter Ended: March 31, 1996 Commission file number: 33-11418
DBSI/TRI EQUITY INCOME FUND A Real Estate Limited Partnership
State of Organization: Idaho Employer ID #: 82-0410175
1070 N. Curtis Rd., Suite 270, Boise, Idaho 83706
Telephone number: (208) 322-5858
The registrant:
(1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file
such reports)
Yes [X] No
(2) has been subject to such filing requirements for the past 90 days.
Yes [X] No
<PAGE>
FORM 10-Q
File Number: 3311418
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Included herein on pages 5-10
Item 2 - Mangement's Discussion and Analysis of Financial
Condition and Results of Operations
Included herein on pages 3-4
<PAGE>
DBSI/TRI EQUITY INCOME FUND
A Real Estate Limited Partnership
(an Idaho limited partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
March 31, 1996
Liquidity and Capital Resources
The Partnership has generated funds primarily from the sale and operation of
rental properties and to a lesser extent from interest on savings and
certificates of deposit. Because of the favorable Portland market, the
Partnership sold the both Portland rental properties. As the Seattle real
estate market improves the Partnership anticipates selling Emerald Court.
Funds are used for rental property operating expenses, distributions to
partners, debt service, fixed asset replacements, capital improvements,
management and professional fees. The Partnership sold Vista Cornell
Apartments in October 1995 and Oak Square Apartments in February 1996. The
general partners believe that the Partnership will have the liquidity and
capital resources to meet all of its known obligations and commitments.
The cash and cash equivalents position of the Partnership at March 31, 1996
represented approximately $991,000 available for Partnership operations,
including approximately $22,000 of reserves and over $969,000 of operating
cash primarily from the sale of Oak Square apartments on February 26, 1996.
There were no external sources of liquidity and there are no outstanding
capital commitments. The average rate of interest earned on cash deposits
was 4%.
Cash Flow and Operations
For the three months ended March 31, 1996 and 1995 the projects generated
$65,833 and $80,207 respectively of cash flow from operating activities per the
Statements of Cash Flows. The following adjustments should be made to the cash
flow in order to arrive at an amount comparable to the first year pro forma
funds from operations as shown in the supplement to the prospectus for Emerald
Court. First, transitory changes in noncash operating assets and liabilities
of approximately $28,300 should be removed, reducing cash flow to the actual
funds which are being generated from operations on an ongoing basis.
Additionally, cash flow should be reduced for principal payments of
approximately $3,000 and for normal operations fixed asset purchases of
approximately $6,700. Cash flow should finally be decreased for approximately
$25,000 of partnership activity and $2,900 for Oak Square funds from
operations. After the above adjustments, the annualized funds for Emerald
Court from operations for the first three months of 1996 was approximately
.02% of the first year pro forma amount.
In the first quarter of 1996 and 1995 total revenue were $653,917 and $224,586.
Total expenses decreased from $236,087 to $185,654. The General Partners have
contracted with HSC Real Estate, Incorporated to manage Emerald Court
Apartments.
On October 19,1995, the Partnership closed the sale of Vista Cornell Apartments
to an unrelated buyer for $1,700,000. The buyer gave a note secured by the
property for $1,460,000 and paid $240,000 cash for the balance. The
Partnership paid costs of sale of approximately $55,000 (including commissions
to unrelated real estate brokers of $50,000), and received net cash proceeds of
approximately $185,000. The buyer's installment note requires payments of
approximately $11,750 per month including interest of 9% on the unpaid balance.
The note may be prepaid at any time and is due in full on October 19, 1999.
The cash flow generated from the interest on the note should exceed the
annualized year to date cash flow of the Vista Cornell Apartments by
approximately 28% or an increase of $29,000.
<PAGE>
On February 26, 1996, the Partnership sold the Oak Square Apartments to
unrelated individual parties, titled through the Western American Exchange
Corporation. The buyers paid $970,000 cash for the property. The Partnership
netted $925,248 from the sale after commissions to unrelated parties of
$29,100, closing costs of $3,870 and a credit for capital improvements of
$4,000. Funds from closing also covered security deposits of $6,245 and
prorations of tax and rent of $1,537. The Partnership purchased the property
in January 1988 for $550,000 and at the time of sale it had fixed asset
carrying costs of $457,941 ($619,218 cost basis less accumulated depreciation
of $161,277). The Partnership realized a gain of $467,307 on the sale
($925,248 net proceeds less adjusted basis of $457,941).
Had this sale occurred on January 1, 1996 the rental income of the partnership
would have decreased by approximately $35,000, net income would have increased
by approximately $14,000 for the three months ended March 31, 1996, and net
income from sales would have decreased by approximately $472,000.
Distributions to partners of $81,478 were made in the first three months of
1996, with $65,833 from current cash flow from operations and $15,645 from
Partnership reserves. Partnership net income after depreciation (on a GAAP
basis) for the three months ended March 31, 1996 was $468,263; therefore, on a
GAAP basis, cash distributions in excess of that amount were a return of
capital. The Partnership's intent is to match distributions with ongoing
cash flow from operations.
Per $1,000 investment (on the basis of a $1,000 investment made at the
inception of the escrow and offering) quarterly distributions have been made in
the following amounts: escrow period - $83; October 1988 through
February 1990 - $18; April 1990 through February 1991 - $19; and May 1991
through February 1996 - $18.
<PAGE>
<TABLE>
DBSI/TRI EQUITY INCOME FUND
A REAL ESTATE LIMITED PARTNERSHIP
(an Idaho limited partnership)
BALANCE SHEETS
<CAPTION>
ASSETS March 31, 1996 Dec 31, 1995
-------------- ------------
<S> <C> <C>
Rental property:
Land $247,500 $357,500
Buildings and improvements 3,170,742 3,628,433
Furniture and fixtures 151,363 196,231
----------- ----------
3,569,605 4,182,164
Less accumulated depreciation (765,997) (889,387)
----------- ----------
2,803,608 3,292,777
Cash and cash equivalents 969,431 18,941
Accounts receivable 2,831 372
Prepaid expenses 4,050
Reserves 21,785 30,482
Tenant security deposits 13,917 28,098
Intangible costs (net) (Note 4) 30,005 38,337
Note receivable (Note 5) 1,459,222 1,460,000
__________ __________
Total assets $5,304,849 $4,869,007
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND CAPITAL
<S> <C> <C>
Accounts payable 23,535 $14,097
Interest payable 20,048 18,525
Taxes payable 12,210 1,715
Note payable affiliate (Note 3) 70,500 35,500
Deferred gain on sale of rental property (Note 5) 575,090 575,090
Mortgage payable (Note 2) 1,962,104 1,965,033
Tenant security deposits payable 9,450 13,920
__________ __________
Total liabilities 2,672,937 2,623,880
__________ __________
Partners' capital 2,631,912 2,245,127
__________ __________
Total liabilities and capital $5,304,849 $4,869,007
<FN>
The Accompanying Notes are an Integral Part of these Financial Statements
</TABLE>
<PAGE>
<TABLE>
DBSI/TRI EQUITY INCOME FUND
A REAL ESTATE LIMITED PARTNERSHIP
(an Idaho limited partnership)
STATEMENTS OF EARNINGS
<CAPTION>
Three Months Ended
REVENUES March 31, 1996 March 31, 1995
______________ ______________
<S> <C> <C>
Tenant rent $139,708 $217,871
Interest income 35,157 60
Other income 6,963 6,655
Gain on sale of rental property (Note 5) 472,089
_____________ ______________
653,917 224,586
</TABLE>
<TABLE>
<CAPTION>
EXPENSES
<S> <C> <C>
Interest 51,851 51,083
Depreciation 37,887 42,262
Property tax and insurance 17,253 24,106
Utilities 18,704 27,205
Maintenance and repairs 19,795 30,921
Administrative 24,712 29,821
Management fees 6,127 9,321
On-site manager 6,993 16,834
Amortization 2,332 4,534
________ _________
185,654 236,087
________ _________
Net income $468,263 ($11,501)
</TABLE>
<TABLE>
STATEMENTS OF PARTNERS' CAPITAL
<CAPTION>
Three Months Ended Year Ended
March 31, 1996 Dec 31, 1995
______________ ____________
<S> <C> <C>
Beginning capital $2,245,127 $2,503,585
Distributions (81,478) (325,912)
Net income 468,263 67,454
_____________ ____________
Ending capital $2,631,912 $2,245,127
<FN>
The Accompanying Notes are an Integral Part of these Financial Statements
</TABLE>
<PAGE>
<TABLE>
DBSI/TRI EQUITY INCOME FUND
A REAL ESTATE LIMITED PARTNERSHIP
(an Idaho limited partnership)
STATEMENTS OF CASH FLOWS
<CAPTION>
CASH FLOWS FROM Three Months Ended
OPERATING ACTIVITIES March 31, 1996 March 31, 1995
______________ ______________
<S> <C> <C>
Net income $468,263 ($11,501)
Adjustments to reconcile net income
to cash flows from operating activities
Depreciation and amortization 40,219 46,796
Gain on sale of rental property (467,307)
Changes in operating assets and liabilities
Accounts receivable (2,459)
Prepaid expenses (4,050) (4,760)
Tenant security deposits 14,181 (33)
Accounts payable 9,438 39,676
Interest payable 1,523 150
Taxes payable 10,495 7,864
Tenant security deposits payable (4,470) 2,015
________ ______
Net cash provided by operating activities 65,833 80,207
CASH FLOWS FROM
INVESTING ACTIVITIES
Proceeds from sale of rental property 925,248
Principal payments - note receivable 778
Rental property purchases (6,659) (20,131)
Increase (decrease) in reserves 8,697 (8,994)
_______ ________
Net cash provided by (used in) investing activities 928,064 (29,125)
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from note payable to affiliate 35,000
Decrease in intangible costs 6,000
Principal payments on loans (2,929) (2,646)
Distributions to partners (81,478) (81,478)
________ ________
Net cash used in financing activities (43,407) (84,124)
Net increase (decrease) in cash and cash equivalents 950,490 (33,042)
Cash and cash equivalents at beginning of period 18,941 41,956
________ ______
Cash and cash equivalents at end of period $969,431 $8,914
<FN>
The Accompanying Notes are an Integral Part of these Financial Statements
</TABLE>
<PAGE>
DBSI/TRI EQUITY INCOME FUND
A REAL ESTATE LIMITED PARTNERSHIP
(an Idaho limited partnership)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 1996 and 1995
1. SUMMARY OF PARTNERSHIP ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Partnership Organization. DBSI/TRI Equity Income Fund A Real Estate Limited
Partnership, was formed on November 15, 1986 with general partners DBSI Housing
Inc., an Idaho corporation, and Tomlinson Realty Investment II, an Idaho
general partnership. On December 31, 1992 DBSI Housing Inc. acquired the
general partner interest of Tomlinson Realty Investment II. Tomlinson Realty
Investment II continues to hold one half of their original general partner
profits interest as a limited partner. The Partnership was in the development
stage through December 31, 1987 and in the offering stage through August 31,
1989. The business purpose of the Partnership is to acquire and operate
leveraged multi-family housing projects primarily in the Northwestern United
States and sell them when market prices are advantageous. The partnership
agreement provides that the Partnership will be dissolved no later than
December 31, 2036, unless sooner terminated as provided in the agreement.
The Partnership acquired three properties during the offering period: Vista
Cornell Apartments, an existing 46-unit project; Oak Square Apartments, an
existing 22-unit project, both located in the Portland, Oregon metropolitan
area; and Emerald Court Apartments, a new 68-unit apartment project located in
the Seattle metropolitan area. The Partnership sold Vista Cornell Apartments
on October 19, 1995, and Oak Square Apartments on February 21, 1996.
Operating profits and losses exclusive of losses from the sale or disposition
of Partnership properties and cash distributions, are allocated 98% to limited
partners and 2% to the general partner. After the limited partners have
received distributions equal to a 7% annual simple interest return on their
capital contributions the general partner receives additional distributions
equal to 5% of total distributions. Proceeds from sale or refinancings are to
be distributed 100% to the limited partners until they have received cumulative
distributions equal to their capital contributions plus an amount equal to 10%
per annum, then 85% to the limited partners and 15% to the general partner.
Significant Accounting Policies. The balance sheets include only those assets,
liabilities, and partners' capital which relate to the business of the
Partnership and do not include any assets, liabilities, revenues or expenses
attributable to the partners' activities. No partners receive salaries from
the Partnership for services. No provision has been made for federal and state
income taxes since these taxes are the personal responsibility of the partners.
Rental property is recorded at cost. Depreciation is computed by the Modified
Accelerated Cost Recovery System (MACRS) or straight-line method over the
estimated useful lives of the assets as follows: buildings and structural
improvements - 15 to 32 years; furniture and fixtures - 5 to 12 years.
Expenditures for maintenance and repairs are charged to operating expenses as
incurred. The cost and accumulated depreciation of assets sold or otherwise
retired are removed from the accounts and gain or loss on disposition is
included in the results of operations. Loan fees are amortized over the
estimated life of the note (ten years) beginning in May, 1989.
Cash and cash equivalents include cash in banks (except for security deposits
and reserve bank accounts), bank certificates of deposit with original
maturities of ninety days or less, and reserve for return to owners. Reserves
consist of bank deposits maintained for replacements and repairs, property
taxes, insurance, and Partnership reserves.
<PAGE>
The estimated fair value of cash and cash equivalents, accounts payable and
long-term debt approximates their carrying amounts.
The preparation of the Partnership's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
The Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, requires management to review long-lived
assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of the assets may not be recoverable. This statement is
effective for the Partnership's fiscal year end December 31, 1996. The
Partnership's existing accounting policies are such that this pronouncement is
not expected to have a material effect on the Company's financial position or
results of operations.
2. MORTGAGES PAYABLE
A $2,020,000 loan from York Associates to the Partnership was used for the
purchase of Emerald Court Apartments in May, 1989. The loan is secured by a
deed of trust on the Emerald Court Apartments. At March 31, 1996, the
carrying value of Emerald Court Apartments was $2,803,608 ($3,569,605 cost
basis of land, buildings and improvements, and furniture and fixtures net of
$765,997 accumulated depreciation). Principal and interest at 10.25% are
payable on the note in monthly installments of $17,753 through June, 1999.
After that date, York Associates holds a call option which, if exercised at
that date, would require a balloon payment of $1,916,363. The current
balance is $1,962,104.
3. NOTES PAYABLE
The Partnership borrowed $70,500 through the first quarter of 1996 from an
affiliate of the General Partner. This loan bears interest at the General
Partner's bank borrowing rate of prime plus 1.5% (9.75% as of March 31). The
loan proceeds provide funds for short term operating cash flow needs of the
Seattle project and enables the Partnership to maintain the distribution rate
during the period of the lower operating cash flow. The loan will be repaid
with proceeds from the sale of Oak Square Apartments.
4. INTANGIBLE COSTS
As of March 31, 1996 loan fees amounted to $89,780 with accumulated
amortization of $59,775 leaving a net amount of $30,005.
5. SALE OF RENTAL PROPERTY
On February 26, 1996, the Partnership sold the Oak Square Apartments to
unrelated individual parties, titled through the Western American Exchange
Corporation. The buyers paid $970,000 cash for the property. The
Partnership netted $925,248 from the sale after commissions to unrelated
parties of $29,100, closing costs of $3,870 and a credit for capital
improvements of $4,000. Funds from closing also covered security deposits of
$6,245 and prorations of tax and rent of $1,537. The Partnership purchased the
property in January 1988 for $550,000 and at the time of sale it had fixed
asset carrying costs of $457,941 ($619,218 cost basis less accumulated
depreciation of $161,277). The Partnership realized a gain of $467,307 on the
sale ($925,248 net proceeds less adjusted basis of $457,941).
Had this sale occurred on January 1, 1996 the rental income of the partnership
would have decreased by approximately $35,000, net income would have increased
by approximately $14,000 for the three months ended March 31, 1996, and net
income from sales would have decreased by approximately $472,000.
The deferred gain resulting from the sale of Vista Cornell Apartments in
October 1995 will be recognized as the note receivable is collected. The note
bears 9% interest and requires monthly payments of $11,747 until October 19,
1996, when the full balance of approximately $1,415,638 plus any unpaid accrued
interest becomes due.
<PAGE>
<TABLE>
6. NET INCOME (LOSS) FROM RENTAL PROPERTIES
The following schedule details separate rental property and
partnership operations for the year ended March 31, 1996.
<CAPTION>
Emerald Oak Partnership
REVENUES Court Apts Square Apts Operations Total
_______________________________________________
<S> <C> <C> <C> <C>
Tenant rent $116,955 $22,753 $139,708
Interest income 144 169 $34,844 35,157
Other income 6,598 365 6,963
Income from sale of rental property 472,089 472,089
______________________________________________
123,697 23,287 506,933 653,917
EXPENSES
Interest 50,329 1,522 51,851
Depreciation 28,200 9,687 37,887
Property tax and insurance 14,001 3,252 17,253
Utilities 15,344 3,360 18,704
Maintenance and repairs 15,515 4,280 19,795
Administrative 8,264 1,115 15,333 24,712
Management fees 4,379 1,748 6,127
On-site manager 6,227 766 6,993
Amortization 2,332 2,332
______________________________________________
142,259 24,208 19,187 185,654
______________________________________________
Net income (loss) ($18,562) ($921) $487,746 $468,263
</TABLE>
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
DBSI/TRI EQUITY INCOME FUND
A Real Estate Limited Partnership
Date __________ by ___________________
Douglas L. Swenson, President of
DBSI Housing Inc., general partner of
DBSI/TRI EQUITY INCOME FUND
A Real Estate Limited Partnership
Date __________ by ____________________
Charles E. Hassard, Secretary-Treasurer
and principal financial officer of
DBSI Housing Inc., the Idaho corporation
that is a general partner and principal
financial officer of
DBSI/TRI EQUITY INCOME FUND
Real Estate Limited Partnership
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 969431
<SECURITIES> 0
<RECEIVABLES> 2831
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1528979
<PP&E> 3569605
<DEPRECIATION> 765997
<TOTAL-ASSETS> 5304849
<CURRENT-LIABILITIES> 710833
<BONDS> 1962104
<COMMON> 0
0
0
<OTHER-SE> 2631912
<TOTAL-LIABILITY-AND-EQUITY> 5304849
<SALES> 0
<TOTAL-REVENUES> 653917
<CGS> 0
<TOTAL-COSTS> 133803
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51851
<INCOME-PRETAX> 468263
<INCOME-TAX> 0
<INCOME-CONTINUING> 468263
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 468263
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
