-----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, SjqVEk9IkcIG5X8QWq4GSyn9zL2HgjnguJgb6PYYX8nlwZw/znGAH21OQJevY88l 2pWoIR7wresJBlbuaLDmIg== 0000809799-96-000004.txt : 19960522 0000809799-96-000004.hdr.sgml : 19960522 ACCESSION NUMBER: 0000809799-96-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960521 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DBSI TRI EQUITY INCOME FUND CENTRAL INDEX KEY: 0000809799 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 820410175 STATE OF INCORPORATION: ID FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-11418 FILM NUMBER: 96570315 BUSINESS ADDRESS: STREET 1: 1070 N CURTIS RD STE 270 CITY: BOISE STATE: ID ZIP: 83706 BUSINESS PHONE: 2083225858 MAIL ADDRESS: STREET 1: 1070 N CURTIS ROAD SUITE 270 CITY: BOISE STATE: ID ZIP: 83706 FORMER COMPANY: FORMER CONFORMED NAME: DBSI TRI EQUITY INVESTORS I DATE OF NAME CHANGE: 19870716 10-Q 1 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 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 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. 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. DBSI/TRI EQUITY INCOME FUND A REAL ESTATE LIMITED PARTNERSHIP (an Idaho limited partnership) BALANCE SHEETS
ASSETS March 31, 1996 Dec 31, 1995 -------------- ------------ 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
LIABILITIES AND CAPITAL 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 The Accompanying Notes are an Integral Part of these Financial Statements
DBSI/TRI EQUITY INCOME FUND A REAL ESTATE LIMITED PARTNERSHIP (an Idaho limited partnership) STATEMENTS OF EARNINGS
Three Months Ended REVENUES March 31, 1996 March 31, 1995 ______________ ______________ 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
EXPENSES 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)
STATEMENTS OF PARTNERS' CAPITAL
Three Months Ended Year Ended March 31, 1996 Dec 31, 1995 ______________ ____________ 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 The Accompanying Notes are an Integral Part of these Financial Statements
DBSI/TRI EQUITY INCOME FUND A REAL ESTATE LIMITED PARTNERSHIP (an Idaho limited partnership) STATEMENTS OF CASH FLOWS
CASH FLOWS FROM Three Months Ended OPERATING ACTIVITIES March 31, 1996 March 31, 1995 ______________ ______________ 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 The Accompanying Notes are an Integral Part of these Financial Statements
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. 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. 6. NET INCOME (LOSS) FROM RENTAL PROPERTIES The following schedule details separate rental property and partnership operations for the year ended March 31, 1996.
Emerald Oak Partnership REVENUES Court Apts Square Apts Operations Total _______________________________________________ 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
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 EX-27 2 ARTICAL 5 FIN. DATA SCHEDULE FOR 1ST QTR 10-Q
5 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 969431 0 2831 0 0 1528979 3569605 765997 5304849 710833 1962104 0 0 0 2631912 5304849 0 653917 0 133803 0 0 51851 468263 0 468263 0 0 0 468263 0 0
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