-----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, TqY6dBX/Mzm4nYT6zQaXM2fLQv3yitlVFVFSmm0X32K71yjj/BcoYI6gC8aREVj+ KkG31CE4ansFS+k3a3qKQg== 0000750258-95-000001.txt : 19951212 0000750258-95-000001.hdr.sgml : 19951212 ACCESSION NUMBER: 0000750258-95-000001 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951108 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: DAVIDSON DIVERSIFIED REAL ESTATE II LIMITED PARTNERSHIP CENTRAL INDEX KEY: 0000750258 STANDARD INDUSTRIAL CLASSIFICATION: 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: 95588202 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 September 30, 1995 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period.........to......... Commission file number 0-14483 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 (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) (Zip Code) Issuer's telephone number (803) 239-1000 Check whether the issuer (1) 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), 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 LIMITED PARTNERSHIP CONSOLIDATED BALANCE SHEET (Unaudited)
September 30, 1995 Assets Cash: Unrestricted $ 856,656 Restricted--tenant security deposits 195,425 Accounts receivable 95,470 Escrow for taxes 516,682 Restricted escrows 627,047 Other assets 540,965 Investment properties: Land $ 2,878,470 Buildings and related personal property 39,728,755 42,607,225 Less accumulated depreciation (17,039,301) 25,567,924 $28,400,169 Liabilities and Partners' Capital (Deficit) Liabilities Accounts payable $ 160,435 Tenant security deposits 195,860 Accrued taxes 668,860 Other liabilities 325,237 Mortgage notes payable 27,042,219 Partners' Capital (Deficit) General partners $ (435,828) Limited partners (1,224.25 units issued and outstanding) 443,386 7,558 $28,400,169
[FN] See Accompanying Notes to Financial Statements b) DAVIDSON DIVERSIFIED REAL ESTATE II LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, 1995 1994 1995 1994 Revenues: Rental income $2,022,298 $1,943,941 $6,026,068 $5,712,968 Other income 157,783 189,299 471,733 508,857 Total revenues 2,180,081 2,133,240 6,497,801 6,221,825 Expenses: Operating 679,128 620,500 1,962,230 1,803,522 General and administrative 42,727 50,585 148,152 166,993 Property management fees 114,108 109,558 340,099 326,592 Maintenance 111,252 283,938 533,681 764,952 Depreciation 446,708 404,777 1,310,315 1,194,018 Interest 632,256 654,056 1,890,628 1,938,179 Property taxes 177,738 175,585 507,695 520,786 Tenant reimbursements (135,444) (110,195) (371,967) (334,079) Total expenses 2,068,473 2,188,804 6,320,833 6,380,963 Casualty loss -- -- (11,977) -- Income (loss) before extraordinary loss 111,608 (55,564) 164,991 (159,138) Extraordinary loss on retirement of debt -- -- (32,181) -- Net income (loss) $ 111,608 $ (55,564) $ 132,810 $ (159,138) Net income (loss) allocated to general partners (2%) $ 2,232 $ (1,112) $ 2,656 $ (3,183) Net income (loss) allocated to limited partners (98%) 109,376 (54,452) 130,154 (155,955) $ 111,608 $ (55,564) $ 132,810 $ (159,138) Per limited partnership unit: Net income (loss) before extraordinary loss $ 89.34 $ (44.48) $ 132.07 $ (127.39) Extraordinary loss -- -- (25.76) -- Net income (loss) per limited partnership unit $ 89.34 $ (44.48) $ 106.31 $ (127.39)
[FN] See Accompanying Notes to Financial Statements c) DAVIDSON DIVERSIFIED REAL ESTATE II LIMITED PARTNERSHIP STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited)
Limited Partnership General Limited Units Partners Partners Total Original capital contributions 1,224.25 $ 1,000 $24,485,000 $24,486,000 Partners' capital (deficit) at December 31, 1994 1,224.25 $(438,447) $ 315,056 $ (123,391) Distributions -- (37) (1,824) (1,861) Net income for the nine months ended September 30, 1995 -- 2,656 130,154 132,810 Partners' capital (deficit) at September 30, 1995 1,224.25 $(435,828) $ 443,386 $ 7,558
[FN] See Accompanying Notes to Financial Statements d) DAVIDSON DIVERSIFIED REAL ESTATE II LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, 1995 1994 Cash flows from operating activities: Net income (loss) $ 132,810 $ (159,138) Adjustments to reconcile net income (loss) to cash provided by operating activities: Depreciation 1,310,315 1,194,018 Amortization of loan costs, discounts and lease concessions 190,717 227,279 Casualty loss 11,977 -- Extraordinary loss on retirement of debt 32,181 -- Change in accounts: Restricted cash 2,921 7,794 Accounts receivable 46,495 (58) Escrow deposits for taxes (231,516) (131,821) Other assets (690) (54,362) Accounts payable (268,895) (128,562) Tenant security deposit liabilities (9,779) (5,576) Accrued taxes 176,309 100,465 Other liabilities (13,447) 11,804 Net cash provided by operating activities 1,379,398 1,061,843 Cash flows from investing activities: Property improvements and replacements (1,132,193) (966,319) Deposits to restricted escrow (104,027) (141,712) Receipts from restricted escrow 73,782 156,273 Insurance proceeds from property damage 142,205 -- Net cash used in investing activities (1,020,033) (951,758) Cash flows from financing activities: Principal payments on notes payable (318,789) (454,325) Repayment of mortgage notes payable (1,765,589) -- Proceeds from long-term borrowings 1,820,000 -- Loan costs (30,682) -- Distributions (1,861) -- Net cash used in financing activities (296,921) (454,325) Net increase (decrease) in cash 62,244 (344,240) Cash at beginning of period 794,412 1,049,860 Cash at end of period $ 856,656 $ 705,620 Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 1,720,177 $1,725,887
[FN] See Accompanying Notes to Financial Statements e) DAVIDSON DIVERSIFIED REAL ESTATE II LIMITED PARTNERSHIP NOTES TO 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 nine month period ended September 30, 1995, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1995. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-KSB for the fiscal year ended December 31, 1994. Certain reclassifications have been made to the 1994 information to conform to the 1995 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. Balances and other transactions with Insignia Financial Group, Inc. and affiliates in 1995 and 1994 are as follows: Nine Months Ended September 30, 1995 1994 Property management fees $340,099 $326,592 Data processing services 2,700 3,400 Marketing services 6,851 4,817 Construction service fees 17,838 17,709 Reimbursement for services from affiliates 103,312 115,334 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 OPERATIONS 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 nine months ended September 30, 1995 and 1994: Average Occupancy 1995 1994 Big Walnut Apartments Columbus, Ohio 97% 97% Lafontenay Apartments Louisville, Kentucky 95% 95% The Trails Apartments Nashville, Tennessee 98% 97% Greensprings Manor Apartments Indianapolis, Indiana 91% 88% Outlet's Ltd. Mall Murfreesboro, Tennessee 89% 93% The Managing General Partner attributes the increase in occupancy at Greensprings Manor to outstanding customer service and the improved appearance of the property. The occupancy at Outlet's Mall decreased as a result of the termination of the London Fog lease. The Partnership reported net income of $132,810 for the nine months ended September 30, 1995, compared to a net loss of $159,138 for the same period of 1994. The Partnership reported net income for the three months ended September 30, 1995, of $111,608 compared to a net loss of $55,564 for the same period in 1994. The increase in net income in 1995 is primarily attributable to an increase in rental income due to rate increases combined with a decrease in maintenance and general and administrative expense. Maintenance expense has decreased due to a decrease in required repairs to the properties in 1995 as these repairs were performed in 1994. General and administrative expense decreased for the three and nine months ended September 30, 1995, due to a reduction of the reimbursements for administrative expenses. Offsetting the changes noted above was an increase in operating and depreciation expense combined with a decrease in other income for the three and nine months ended September 30, 1995. Operating expense increased due to the increased advertising at The Trails and Outlet's Mall in an attempt to maintain and improve occupancy. Also, repairs and maintenance payroll and common area maintenance charges increased due to efforts to improve the appearance of Outlet's Mall. Depreciation expense increased due to the capital improvements made at Outlet's Mall. Other income decreased due to the reduction in forfeited deposits at Big Walnut Apartments. On January 19, 1995, the Partnership refinanced the mortgage encumbering Outlet's Ltd. Mall. The total indebtedness refinanced was $1,765,589, of which $337,494 related to the first mortgage and $1,428,095 related to the second mortgage. The refinancing replaced the existing indebtedness which carried a stated interest rate 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 $32,181 during the nine months ended September 30, 1995. During the first nine months of 1995, the Partnership recorded two casualties. Big Walnut incurred storm damage which resulted in a casualty gain of $2,358, net of insurance proceeds. The Trails continued to experience problems with the pool due to freeze damage and recorded a casualty loss of $14,335, net of insurance proceeds. 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. As of September 30, 1995, the Partnership had cash balances of $856,656 as compared to $705,620 at September 30, 1994. Net cash provided by operating activities increased as a result of net income reported for the first nine months of 1995 versus a net loss reported for the same period of 1994. Also contributing to the increase in cash provided by operating activities was a decrease in accounts receivable due to the receipt of insurance proceeds related to the loss at Lafontenay Apartments. Net cash used in investing activities increased in 1995 due to property improvements at Outlet's Mall in an attempt to modernize the mall. Offsetting the change noted was an increase in insurance proceeds from damaged property. Net cash used in financing activities decreased in 1995 as a result of the debt refinancing for Outlet's Mall in January 1995, as mentioned above. 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 Managing General Partner is exploring the feasibility of selling or refinancing Outlet's Mall which could result in a return of capital. The mortgage indebtedness of $27,042,219, net of discount, is amortized over varying periods. The mortgage notes require balloon payments ranging from June 1997 to December 2009 at which time the individual properties will be sold or refinanced. No distributions were made in 1994. During the first nine months of 1995, $1,861 of distributions were paid on behalf of the limited partners to the State of Indiana relating to the operations of Greensprings Manor Apartments. Future cash distributions will depend on the levels of net cash generated from operations, refinancing, property sales and the availability of the cash reserves. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) 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, 1995. 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. Controller and Principal Accounting Officer Date: November 8, 1995 EX-27 2
5 This schedule contains summary financial information extracted from Davidson Diversified Real Estate II 1995 Third Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB. 0000750258 DAVIDSON DIVERSIFIED REAL ESTATE II 1 9-MOS DEC-31-1995 SEP-30-1995 856,656 0 95,470 0 0 0 42,607,225 17,039,301 28,400,169 0 27,042,219 0 0 0 7,558 28,400,169 0 6,497,801 0 0 6,320,833 0 0 0 0 0 0 (32,181) 0 132,810 106.31 0 The Registrant has an unclassified balance sheet.
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