-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FM/7l2iwU+gAFGYIzz2bMbeTmrD7c8+Rz+Nhr3th13NwOKo/f4qLdwIexsE2cRsM B+jqfo6lJZiemuz6ZHOgkw== 0000317900-96-000004.txt : 19960513 0000317900-96-000004.hdr.sgml : 19960513 ACCESSION NUMBER: 0000317900-96-000004 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960510 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DAVIDSON DIVERSIFIED REAL ESTATE II LIMITED PARTNERSHIP CENTRAL INDEX KEY: 0000750258 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 621207077 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-14483 FILM NUMBER: 96559625 BUSINESS ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLZ STREET 2: P O BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8032391000 MAIL ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLZ STREET 2: P O BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 FORMER COMPANY: FORMER CONFORMED NAME: FREEMAN DIVERSIFIED REAL ESTATE II LP DATE OF NAME CHANGE: 19910501 10QSB 1 FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Quarterly or Transitional Report (As last amended by 34-32231, eff. 6/3/93.) 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 March 31, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT For the transition period.........to......... Commission file number 0-14483 DAVIDSON DIVERSIFIED REAL ESTATE II LIMITED PARTNERSHIP (Exact name of small business issuer as specified in its charter) Delaware 62-1207077 (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) (Zip Code) Issuer's telephone number (864) 239-1000 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 II, L.P. CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) March 31, 1996 Assets Cash and cash equivalents: Unrestricted $ 871 Restricted--tenant security deposits 184 Accounts receivable 39 Escrows for taxes and insurance 364 Restricted escrows 921 Other assets 451 Investment properties Land $ 2,878 Buildings and related personal property 40,057 42,935 Less accumulated depreciation (17,935) 25,000 $ 27,830 Liabilities and Partners' Deficit Liabilities Accounts payable $ 102 Tenant security deposits 185 Accrued taxes 544 Other liabilities 529 Mortgage notes payable 26,883 Partners' (Deficit) Capital General partners $ (444) Limited partners (1,224.25 units issued and outstanding) 31 (413) $ 27,830 See Accompanying Notes to Consolidated Financial Statements b) DAVIDSON DIVERSIFIED REAL ESTATE II, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended March 31, 1996 1995 Revenues: Rental income $ 2,162 $ 2,114 Other income 194 167 Total revenues 2,356 2,281 Expenses: Operating 746 722 General and administrative 82 46 Maintenance 221 211 Depreciation 473 422 Interest 617 651 Property taxes 189 154 Bad debt 40 -- Total expenses 2,368 2,206 (Loss) income before loss on disposal of property and extraordinary loss (12) 75 Loss on disposal property (64) -- (Loss) income before extraordinary item (76) 75 Extraordinary loss on retirement of -- (32) Net (loss) income $ (76) $ 43 Net (loss) income allocated to general partners (2%) (2) 1 Net (loss) income allocated to limited partners (98%) (74) 42 Net (loss) income $ (76) $ 43 Per limited partnership unit: Net (loss) income before extraordinary item $ (60.45) $ 60.04 Extraordinary loss -- (25.62) Net (loss) income $ (60.45) $ 34.42 See Accompanying Notes to Consolidated Financial Statements c) DAVIDSON DIVERSIFIED REAL ESTATE II, L.P. CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited) (in thousands, except unit data)
Limited Partnership General Limited Unit Partners Partners Total Original capital contributions 1,224.25 $ 1 $24,485 $24,486 Partners' (deficit) capital at December 31, 1995 1,224.25 $ (442) $ 105 $ (337) Net loss for the three months ended March 31, 1996 -- (2) (74) (76) Partners' (deficit) capital at March 31, 1996 1,224.25 $ (444) $ 31 $ (413) See Accompanying Notes to Consolidated Financial Statements
d) DAVIDSON DIVERSIFIED REAL ESTATE II, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Three Months Ended March 31, 1996 1995 Cash flows from operating activities: Net (loss) income $ (76) $ 43 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation 473 422 Bad debt 40 -- Amortization of discounts, loan costs and intangibles 65 72 Extraordinary loss on retirement of debt -- 32 Loss on disposal of property 64 -- Change in accounts: Restricted cash -- (4) Accounts receivable (4) 36 Escrows for taxes and insurance (18) (11) Other assets 14 11 Accounts payable (68) (158) Tenant security deposit liabilities -- (1) Accrued taxes 35 12 Other liabilities (1) (18) Net cash provided by operating activities 524 436 Cash flows from investing activities: Insurance proceeds 227 -- Property improvements and replacements (202) (338) Deposits to restricted escrows (281) (27) Withdrawals from restricted escrows 3 28 Net cash used in investing activities (253) (337) Cash flows from financing activities: Payments on mortgage notes payable (114) (104) Repayment of mortgage notes payable -- (1,765) Proceeds from long-term borrowings -- 1,820 Loan costs -- (31) Distributions -- (2) Net cash used in financing activities (114) (82) Net increase in cash 157 17 Cash at beginning of period 714 795 Cash at end of period $ 871 $ 812 Supplemental disclosure of cash flow information: Cash paid for interest $ 554 $ 579 See Accompanying Notes to Consolidated Financial Statements
DAVIDSON DIVERSIFIED REAL ESTATE II, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note A - Basis of Presentation The accompanying unaudited financial statements 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 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, 1996, are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. For further information, refer to the financial statements and footnotes thereto included in the Davidson Diversified Real Estate II, L.P.'s (the "Partnership") annual report on Form 10-KSB for the year ended December 31, 1995. Certain reclassifications have been made to the 1995 information to conform to the 1996 presentation. Note B - 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 were paid to the Managing General Partner and affiliates for the three months ended March 31, 1996 and 1995. Three Months Ended March 31, (in thousands) 1996 1995 Property management fees $104 $113 Reimbursement for services of affiliates 50 37 The Partnership insures its properties under a master policy through an agency and insurer unaffiliated with the Managing General Partner. An affiliate of the Managing General Partner acquired, in the acquisition of a business, certain financial obligations from an insurance agency which was later acquired by the agent who placed the current year's master policy. The current agent assumed the financial obligations to the affiliate of the Managing General Partner who receives payments on these obligations from the agent. The amount of the Partnership's insurance premiums accruing to the benefit of the affiliate of the Managing General Partner by virtue of the agent's obligations is not significant. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The Partnership's investment properties consist of four apartment complexes and one commercial property. The following table sets forth the average occupancy of the properties for the three months ended March 31, 1996 and 1995: Average Occupancy 1996 1995 Big Walnut Apartments 95% 95% Columbus, Ohio Lafontenay Apartments 94% 95% Louisville, Kentucky The Trails Apartments 94% 98% Nashville, Tennessee Greensprings Manor Apartments 93% 87% Indianapolis, Indiana Outlet's Ltd. Mall 84% 91% Murfreesboro, Tennessee Occupancy at The Trails Apartments decreased due to move outs relating to job transfers out of the Nashville area and due to tenants buying homes due to attractive interest rates. The Managing General Partner attributes the increase in occupancy at Greensprings Manor Apartments to successful marketing efforts on efficiency apartments. Outlet's Mall also had a decrease in occupancy primarily due to the move out of Leslie Fay, a tenant that occupied 6,250 square feet or 6% of the total space. The Partnership's net loss for the first three months of 1996 was $76,000 versus net income of $43,000 for the same period in 1995. Revenue increased slightly but was offset by increases in general and administrative and depreciation expenses. Other income increased due to an increase in lease cancellation fees and cleaning and damage fees at Greensprings Manor Apartments. The property experienced greater turnover compared to the prior year, which in turn increased cleaning and lease cancellation fees. General and administrative expense increased primarily due to an increase in partnership administration cost reimbursements. Depreciation expense increased due to additional purchases of depreciable fixed assets. Bad debt expense relates to reserves that were set up due to tenants at Greensprings Manor Apartments that had been evicted, yet still had outstanding accounts receivable balances. On January 8, 1996, a fire at The Trails Apartments destroyed four apartment units. The write-off of these units, which were not yet fully depreciated, resulted in a $64,000 loss on disposal of property. At March 31, 1996, reconstruction of these units had not began. On January 19, 1995, the Partnership refinanced the mortgage encumbering Outlet's Ltd. Mall. The total indebtedness refinanced was $1,766,000 of which $337,000 related to the first mortgage and $1,428,000 related to the second mortgage. The refinancing replaced the existing indebtedness which carried stated interest rates from 8.5% to 10.75% with maturity dates ranging from April 1995 to October 1995. The new mortgage indebtedness of $1,820,000 carries a stated interest rate of 10.125% and is amortized over 180 months with a balloon payment due on January 15, 2000. As a result of the refinancing, the Partnership recognized an extraordinary loss of $32,000, as a result of the write-off of an unamortized mortgage discount and unamortized loan costs. 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 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. The Partnership had unrestricted cash of $871,000 at March 31, 1996, versus unrestricted cash of $812,000 of March 31, 1995. Net cash provided by operating activities increased as a result of a lesser decrease in account payable. Net cash used in investing activities was less for the three months ended March 31, 1996, versus the three months ended March 31, 1995. This decrease is due to decreased property improvements and replacements. In addition, insurance proceeds of $227,000 were received for the four destroyed apartment units at The Trails Apartments. The proceeds were deposited in a restricted escrow account in which funds can be drawn as expenses for the reconstruction of these units begins. 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 various 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 $26,883,000 (net of discount), with stated interest rates of 7.6% to 10.125%, has maturity dates ranging from June 1997 to November 2002. Included in the outstanding indebtedness is a first mortgage, secured by the LaFontenay Apartments, which matures June 1, 1997, with a principal balance due at maturity of $6,728,000. The Managing General Partner intends to refinance this indebtedness in order to obtain a more favorable interest rate. The Managing General Partner is exploring the feasibility of selling Outlet's Mall. If the Managing General Partner is not successful in selling this property, then the Managing General Partner also intends to refinance the first mortgage secured by the property in order to obtain a more favorable interest rate. There are no guarantees that a sale or refinance will be successful. PART II - OTHER INFORMATION ITEM 1. 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 pending or outstanding litigation will be resolved without a material adverse effect upon the business, financial condition, or operations of the Partnership. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: None (b) Reports on Form 8-K: None filed during the three months ended March 31, 1996. 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 II By: Davidson Diversified Properties, Inc. Managing General Partner By: /s/Carroll D. Vinson Carroll D. Vinson President By: /s/Robert D. Long, Jr. Robert D. Long, Jr. Vice President/CAO Date: May 10, 1996 EX-27 2
5 This schedule contains summary financial information extracted from Davidson Diversified Real Estate II Limited Partnership's 1996 First Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000750258 DAVIDSON DIVERSIFIED REAL ESTATE II LIMITED PARTNERSHIP 1,000 3-MOS DEC-31-1996 MAR-31-1996 871 0 39 0 0 2,379 42,935 17,935 27,830 831 26,883 0 0 0 (413) 27,830 0 2,356 0 0 2,368 0 617 (76) 0 (76) 0 0 0 (76) (.061) 0
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