-----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, HndMi1SWUg/2bCrpoO2BA1bAALSHBYP6N2Y/WVZabsR8lE/doWbxDLHS98rAvCG7 s6AxZnvMQgdPZXxalPGUUA== 0000792181-96-000005.txt : 19960812 0000792181-96-000005.hdr.sgml : 19960812 ACCESSION NUMBER: 0000792181-96-000005 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960809 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: 96606991 BUSINESS ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLZ STREET 2: P O BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8642391513 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 June 30, 1996 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 (864) 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) (in thousands, except unit data) June 30, 1996 Assets Cash and cash equivalents: Unrestricted $ 999 Restricted--tenant security deposits 190 Accounts receivable 68 Escrow for taxes 355 Restricted escrows 961 Other assets 432 Investment properties: Land $ 2,878 Buildings and related personal property 40,366 43,244 Less accumulated depreciation (18,415) 24,829 $ 27,834 Liabilities and Partners' Deficit Liabilities Accounts payable $ 235 Tenant security deposits 191 Accrued taxes 505 Other liabilities 274 Mortgage notes payable 26,800 Partners' Capital (Deficit) General partners $ (439) Limited partners (1,224.25 units issued and outstanding) 268 (171) $ 27,834 See Accompanying Notes to Consolidated Financial Statements b) DAVIDSON DIVERSIFIED REAL ESTATE II LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data)
Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 Revenues: Rental income $ 2,178 $ 2,126 $ 4,340 $ 4,240 Other income 191 147 385 314 Total revenues 2,369 2,273 4,725 4,554 Expenses: Operating 830 786 1,576 1,510 General and administrative 78 60 160 105 Maintenance 245 211 466 422 Depreciation 480 442 953 864 Interest 626 608 1,243 1,258 Bad debt recovery, net (40) -- -- -- Property taxes 156 176 345 330 Total expenses 2,375 2,283 4,743 4,489 (Loss) income before loss on disposal of property, casualty item and extraordinary item (6) (10) (18) 65 Loss on disposal of property (2) -- (2) -- Casualty gain (loss) 250 (12) 186 (12) Income (loss) before extraordinary item 242 (22) 166 53 Extraordinary loss on retirement of debt -- -- -- (32) Net income (loss) $ 242 $ (22) $ 166 $ 21 Net income allocated to general partners (2%) $ 5 $ -- $ 3 $ -- Net income (loss) allocated to limited partners (98%) 237 (22) 163 21 Net income (loss) $ 242 $ (22) $ 166 $ 21 Per limited partnership unit: Income (loss) before extraordinary item $ 193.59 $ (17.97) $ 133.14 $ 42.43 Extraordinary loss -- -- -- (25.62) Net income (loss) $ 193.59 $ (17.97) $ 133.14 $ 16.81 See Accompanying Notes to Consolidated Financial Statements
c) DAVIDSON DIVERSIFIED REAL ESTATE II LIMITED PARTNERSHIP STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited) (in thousands, except unit data)
Limited Partnership General Limited Units 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 income for the six months ended June 30, 1996 -- 3 163 166 Partners' (deficit) capital at June 30, 1996 1,224.25 $ (439) $ 268 $ (171) See Accompanying Notes to Consolidated Financial Statements
d) DAVIDSON DIVERSIFIED REAL ESTATE II LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Six Months Ended June 30, 1996 1995 Cash flows from operating activities: Net income $ 166 $ 21 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 953 864 Amortization of loan costs, discounts 131 127 and lease concessions Casualty (gain) loss (186) 12 Extraordinary loss on retirement of debt -- 32 Loss on disposal of property 2 -- Change in accounts: Restricted cash (7) (2) Accounts receivable 33 85 Escrow deposits for taxes (8) (28) Other assets (2) (4) Accounts payable 28 (48) Tenant security deposit liabilities 6 (1) Accrued taxes (4) (2) Other liabilities (29) 14 Net cash provided by operating activities 1,083 1,070 Cash flows from investing activities: Property improvements and replacements (473) (811) Deposits to restricted escrow (321) (65) Receipts from restricted escrow 3 28 Insurance proceeds from property damage 227 6 Net cash used in investing activities (564) (842) Cash flows from financing activities: Principal payments on notes payable (231) (210) Repayment of mortgage notes payable -- (1,765) Proceeds from long-term borrowings -- 1,820 Loan costs (3) (31) Distributions -- (2) Net cash used in financing activities (234) (188) Net increase in cash 285 40 Cash and cash equivalents at beginning of period 714 794 Cash and cash equivalents at end of period $ 999 $ 834 Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 1,114 $ 1,124 Property improvements and replacements in accounts payable $ 37 $ -- See Accompanying Notes to Consolidated Financial Statements
e) DAVIDSON DIVERSIFIED REAL ESTATE II LIMITED PARTNERSHIP 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 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 six month period ended June 30, 1996, are not necessarily indicative of the results that may be expected for the fiscal 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 fiscal 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 each of the six month periods ended June 30, 1996 and 1995. 1996 1995 (in thousands) Property management fees $ 211 $ 226 Reimbursement for services of affiliates 113 98 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 each of the six months ended June 30, 1996 and 1995: Average Occupancy 1996 1995 Big Walnut Apartments Columbus, Ohio 96% 97% Lafontenay Apartments Louisville, Kentucky 93% 95% The Trails Apartments Nashville, Tennessee 93% 98% Greensprings Manor Apartments Indianapolis, Indiana 94% 90% Outlet's Ltd. Mall Murfreesboro, Tennessee 83% 90% 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. Also contributing to the decrease in occupancy at The Trails Apartments was the fire that destroyed four units. A few tenants residing close to the destroyed units have moved out due to the reconstruction. The Managing General Partner attributes the increase in occupancy at Greensprings Manor Apartments to successful marketing efforts on efficiency apartments. Outlet's Ltd. 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 income for the six months ended June 30, 1996, was $166,000 versus net income of $21,000 for the six months ended June 30, 1995. The Partnership realized net income of $242,000 for the three months ended June 30, 1996, versus a net loss of $22,000 for the three months ended June 30, 1995. The increased income can be primarily attributed to a casualty gain of $186,000 for the six months ended June 30, 1996 (see discussion below). Revenues increased because of rental income and other income increases but was partially offset by increases in general and administrative, maintenance, and depreciation expenses. Rental income increased due to increases in average rental rates at all of the Partnership's investment properties. Other income increased due to an increase in lease cancellation fees and cleaning and damage fees at Greensprings Manor Apartments and Lafontennay Apartments. Both properties 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. Maintenance expense increased at Big Walnut Apartments due to damp spring weather that caused excessive roof and balcony repairs. This increased interior and exterior improvements because interior painting, dry wall, and concrete work had to be done. Depreciation expense increased due to additional purchases of depreciable fixed assets. Lafontennay Apartments realized a $2,000 loss on disposal of property during the first six months of 1996. This loss related to the write-off of a roof due to replacement. This roof was not fully depreciated at the time of the replacement. 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 $62,000 loss on disposal of property. During the second quarter of 1996, the Trails Apartments received insurance proceeds of $227,000 and estimates that it will receive an additional $27,000 as more of the reconstruction is finished. Also, in February 1996, there was another fire at The Trails Apartments that only caused minor smoke damage. As of June 30,1996, only $6,000 of expenses had been incurred for the clean-up of this fire. No insurance proceeds are to be expected since the estimated costs to repair the units is less than the insurance deductible. As a result of the above, the Partnership realized a $186,000 casualty gain as of June 30, 1996. During the first six months of 1995, the Partnership recorded two casualties. Big Walnut Apartments incurred storm damage which resulted in a casualty gain of $2,000, net of insurance proceeds. The Trails Apartments continued to experience problems with the pool due to freeze damage and recorded a casualty loss of $14,000, net of insurance proceeds. As a result of these casualties, the Partnership netted a $12,000 casualty loss for the six months ended June 30, 1995. On January 19, 1995, the Partnership refinanced the mortgage encumbering Outlet's Ltd. Mall. The total indebtedness refinanced was $1,765,000 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 ranging 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 $999,000 at June 30, 1996, versus unrestricted cash of $834,000 at June 30, 1995. Net cash provided by operating activities increased slightly due to an increase in net income and accounts payable. Partially offsetting this increase was a decrease in other liabilities. Net cash used in investing activities decreased due to a decrease in property improvements and replacements. In 1995, there were substantial property improvements at Outlet's Ltd. Mall in an attempt to modernize the mall. Net cash used in financing activities increased due to an increase in principal payments on notes payable. 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 $26,800,000 (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. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Partnership is unaware of any pending or outstanding litigation that is not of a routine nature. The Managing General Partner of the Partnership 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 quarter ended June 30, 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: August 9, 1996 EX-27 2
5 This schedule contains summary financial information extracted from Davidson Diversified Real Estate II Limited Partnership 1996 Second 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 6-MOS DEC-31-1996 JUN-30-1996 999 0 68 0 0 0 43,244 18,415 27,834 0 26,800 0 0 0 (171) 27,834 4,725 0 0 4,743 0 0 1,243 166 0 166 0 0 0 166 133.14 0 The Registrant has an unclassified balance sheet. Multiplier is 1.
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